The rise of mobile wallets and digital banking in Bangladesh has led to a massive increase in financial inclusion. Financial institutions have started using eKYC combined with digital ID solutions to handle this huge influx of customers.
This has made the customer onboarding process seamless and quick while still being compliant with regulations. Innovators like Maruful Islam Jhalak have pioneered eKYC systems with digital identification solutions to make organizations like Nagad market leaders in the digital banking industry.
Read on to learn how digital identity solutions boost eKYC compliance in Bangladesh.
What is KYC?
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KYC or Know Your Customer is the process of verifying a customer’s identity. The primary purpose behind KYC is to know more about a customer and their financial transactions in order to create a level of trust with them.
KYC protects financial institutions, their customers, and the broader market from fraud, money laundering, and other financial crimes.
KYC takes place during customer onboarding but is a dynamic process that is updated throughout the customer relationship with the organization.
What is eKYC?
With the rapid digitalization seen in almost all industries globally, it is no surprise that the same is true for banks and financial institutions. eKYC is an outcome of this digitalization.
It is essentially the digitalization and automation of the KYC process. This evolution of the traditional KYC methodology makes the process of customer onboarding much easier and simpler while maintaining KYC best practices that most financial institutions are bound to follow per regulations.
Noticeably, eKYC in Bangladesh has been adopted by fintech giants Nagad and bKash as an easy means of customer onboarding. More and more financial institutions are implementing the processes to make it easier for customers to join. This digitalization has come with the benefit of financial inclusion of the unbanked, but it has challenges.
Challenges of financial inclusion
Mobile wallets such as Nagad have brought the unbanked and underbanked population under their service umbrella. Still, the main challenge they face is keeping compliance with KYC and anti-money laundering (AML) regulations. This is especially true since digital banking allows sophisticated criminals to run their illicit activities and attack other users.
This is why eKYC and AML compliance must balance with smooth and feasible customer onboarding processes to ensure customers get the best of both worlds.
How do digital identity solutions boost eKYC compliance?
The challenges faced in eKYC are being tackled by further innovations. Namely, the use of digital identities. These are electronic and photographic identity cards that the government usually issues.
In Bangladesh, the most widely used digital identification is the National ID that most adults in the country have.
Today it is estimated that over 1.1 billion people globally lack a proper form of identification.
Creates a Digital Identity
Digital identities offer immense opportunities compared to the traditional approach that relies on hard copy identification. It is not surprising that digital equivalents are replacing these legacy systems.
Brings customer satisfaction
Digital identity solutions vastly improve client experiences compared to manual, paper-based KYC customer due diligence processes that are costly and time-inefficient, which in turn cause customer dissatisfaction.
This is why many financial institutions follow the path pioneered by mobile wallet companies like Nagad. They have realized the importance of a new client’s first impression and know how this can set the tone for the rest of the relationship.
Also, the increasing competition of digital banking solutions entering the market means that all companies are looking to fully complete their KYC obligations as quickly and smoothly as possible while providing a seamless client experience.
Gain more control
But what makes digital identities improve eKYC compliance the most is the ability to continuously monitor and update KYC and CDD to ensure that all accounts adhere to AML best practices.
eKYC and digital identification have enabled financial institutions to serve more people than ever. This has driven financial inclusion to never before seen levels.
While many thought that the digitalization stumbling block would be complying with KYC and AML best practices, innovation has made it possible for both digitalization and compliance to work in tandem.
This gives customers unprecedented levels of convenience while giving financial institutions the ability to bring more people under their services much faster.