Digital KYC Solution: Ensuring Compliance with Regulatory Standards


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Keeping your company compliant with the numerous laws and norms that regulate financial services is crucial as the world becomes more digital.

Many firms disregard the significance of upholding compliance in their haste to adopt new technology and achieve a competitive edge.

The Know Your Customer (KYC) guidelines are one such set of requirements that apply to all financial services.

Financial institutions are required to gather and maintain specific customer information by KYC regulations.

It is created to promote transparency and combat money laundering.

The collecting of this data can be extremely laborious, especially in light of the numerous ways that technology can be used to get around these regulations.

Digital KYC solution fill this need.

Digital KYC Solution: What Are They?

A digital KYC solution, at its most basic level, is a piece of software that enables financial institutions to quickly and easily comply with KYC laws.

Businesses can maintain KYC data across the entire customer lifecycle because of blockchain’s immutable, transparent nature, and ability to follow every transaction.

They can thus boost their confidence that the data they’re using is correct and reliable by verifying customer information at every level.

A financial institution may save time and money by implementing a digital KYC solution.

In addition to automating procedures and adhering to KYC rules, it can also offer extra services like fraud detection, authentication, and verification.

Due to these features, it is the perfect tool for use in a financial institution.

What Business Applications Are There For This?

A digital KYC solution might be the perfect fit for your requirements if you are currently working inside a regulatory framework.

It means reducing time and resources while retaining your current level of assurance.

You may be confident that you’re giving your consumers a secure and effective environment to conduct business in because it automates numerous processes and standardises KYC data.

What Motivates Businesses to Use Digital Identity Management?

To ensure regulatory compliance, a transition to digital identity management (DIM) strategy is being pushed.

Strict regulations that demand KYC procedures are in place for a large variety of businesses, including financial services and healthcare.

Companies may expedite and automate the entire process by switching to a digital KYC solution, and they can be sure that regulatory compliance is always maintained.

Because patient and consumer privacy are of the highest concern. 

The financial services and healthcare sectors in particular have exceptionally high standards when it comes to identity verification.

Which Advantages Come from a Digital KYC Solution?

Switching to a digital KYC solution has many advantages, both from compliance and convenience, and security perspectives.

Keeping crucial identification documents, like passports, in a safe and secure area and preventing their loss or theft are the main ways that businesses may maintain the highest level of security.

Customers can manage and keep all of their identity data, including their credit cards, in a single spot by using a virtual wallet.

Due to the digitisation of the entire process.

Businesses may now give clients real-time information on their activities and communicate with them using messaging services like Slack or Microsoft Teams.

Is There a Huge Need for Digital KYC Solution?

Particularly among financial institutions and healthcare providers, there is a huge demand for a digital KYC solution.

About 80% of financial services companies are using or considering utilising a digital KYC solution, according to the Deloitte report on the future of finance.

The usage of digital KYC solution is also expected to nearly double by 2025 among healthcare providers, where it is already very high.

In A Digital KYC Environment, How Do You Confirm Identity?


Companies have increasingly moved to a ‘passive’ biometric authentication model, which does not require a user to perform any actions (e.g., scan their fingerprint).

But instead collects data via webcam or scans of their face, as a result of the pandemic and increased awareness around privacy and security.

In many instances, businesses will also combine authentication techniques, such as a PIN code and a face or fingerprint scan.

In A Digital KYC Environment, Where Are Identity Documents Stored?

Security is crucial since businesses keeping personal data in a digital KYC environment includes customer identity data, bank account numbers, and proprietary company information.

As a result, companies frequently store the identification documents of their clients in a secure location, such as a safe or the AWS Key Management Service (AWS KMS).

Businesses will also retain documents like passports in an accessible location to provide customers with the highest level of convenience.

These are the possible reasons why so many companies are implementing digital KYC strategies:

Digital KYC Solution Enhanced Security And Privacy


The enhanced level of privacy and security that internet marketplaces offer is undoubtedly the most evident and significant feature.

For instance, users of Amazon are given a digital certificate known as a “security token” when they log in, giving them the assurance that their personal information is safe and won’t be misused.

The Payment Card Industry (“PCI”) Security Standards Council, is an independent nonprofit that creates and publishes security standards for the $16 trillion worldwide credit card industry.

It is at the forefront of this regulatory compliance campaign.

The PCI Security Standards Council published the following conclusions in early March 2020:

  • Weak, stolen, or out-of-date passwords are to blame for 70% of all data breaches.
  • The cause of 70% of data breaches is inadequate encryption security.
  • Threats to security are responsible for just 28% of all data breaches.
  • The cause of 89% of data breaches is the result of inadequate authentication procedures.

Every corporation requires a solid cyber security plan to protect its business from data breaches and assaults.

It can be difficult to achieve the highest level of security and keep a functioning company, nevertheless.

Also, as businesses become increasingly digital, the distinctions between other departments and cyber security fuzziness.

This creates a special issue because other departments like HR, legal, and procurement must also embrace the digital revolution in addition to your cybersecurity staff.

The Convenience of Integrating Digital KYC Solution


The extreme simplicity of using online marketplaces is another significant aspect that sets them apart.

Users are offered a selection of products when they visit Amazon, for instance, based on their browsing history and other site purchases.

This is in contrast to a traditional retail setting, where a customer must look for the item they want and evaluate options for quality and price before making a purchase.

Similar to Amazon, consumers can locate a wide variety of products on eBay that suit their needs depending on their search history and the goods being sold by other users.

The benefit of using an online marketplace is that it keeps all the data about the products consumers desire in one place, typically a database.

This simplifies the shopping process and makes it much easier for businesses to satisfy customers’ needs.

In contrast, if a company wants to sell a comparable product but doesn’t have a store or website, it must gather this information manually.

This is a time-consuming, difficult process that frequently leads to mistakes because the data entry worker’s fingers must move quickly to keep up with the volume of orders.

Digital KYC Solution As A Reliable Information Source


Online marketplaces’ ability to give customers accurate, current information on a product’s quality, price, and delivery time is one of their main selling points.

Customers can give reviews and feedback about their buying experiences on the majority of websites, as well as report any problems they may have had with a specific good or service.

Consumers are able to make wiser selections regarding the products that interest them thanks to this feedback and rating.

Also, shoppers feel like they are getting good value for their money because online marketplaces frequently feature well-known brand names.

Customers also stand a better chance of getting their money back if they run into issues because they are well-known companies.

Customers might not be as inclined to give a product a second try if a company promises that it is “Top Notch” yet it turns out to be of inferior quality.

Digital KYC Solution Efficiency


The effectiveness of your procedures is a crucial aspect to take into account while enhancing regulatory compliance.

Several firms still use antiquated, handwritten procedures that were created in an era before computers were common.

These procedures were frequently constructed with little consideration for efficiency or security, which resulted in several security vulnerabilities.

Further limiting their usability and increasing their susceptibility to error is that many of these processes were created by individuals with limited digital experience.

Modern technology has made it feasible to create programmes and processes that are both user-friendly and safe.

Any improvement in productivity is welcome, especially given the increased number of individuals working remotely as a result of the pandemic, which reduces the amount of time spent at a desk.

Lower Cost of Using Digital KYC Solution


The cost savings that come from using digital KYC solution over non-digital alternatives is another advantage.

The price of a data breach can range from $500 to $5,000 per record, according to Gartner Inc.

Consider the possibility that client records might have been stolen as a result of a compromise if Clear & Simple had not embraced a digital identity solution.

Such a breach would undoubtedly have been expensive, costing hundreds of thousands of dollars in repairs.

The expense of non-digital KYC processes is high even when there is no breach.

Think about the PCI Security Standards Council’s prediction that by 2023, the world will spend more than $16 trillion on cybersecurity.

Digital KYC Solution in Modern Technologies


Organizations must make use of cutting-edge technologies that can improve and streamline their processes if they are to handle these issues.

Fortunately, forward-thinking businesses have risen to the occasion and are now offering clients digital KYC solution that helps raise security and compliance standards.

One such firm that provides organisations with the tools they need to execute digital identity verification and onboarding of new clients is Clear & Easy.

Digital KYC Solution Increase Customer Satisfaction


Customers can now anticipate greater security, streamlined procedures, and cost savings when working with any company.

Thanks to the efforts of groups like the PCI Security Standards Council and the growing number of businesses that have accepted the challenge.

Organizations should work to embrace best practises that satisfy the needs of today’s dynamic digital world in order to offer the greatest possible customer experience.

Businesses may improve the efficiency and security of their KYC procedures while improving customer satisfaction by implementing a digital KYC solution.

How Can Fraud and Abuse Be Stopped?


It’s critical to remember that just because something is available online, it doesn’t necessarily mean that anybody can use it.

Online trading has inherent risks, especially if you are not prepared to handle them.

A few situations where incompetence may occur are listed below:

  • Phishing
  • Identity Fraud
  • Credit Card Theft
  • Laundering Money
  • Market Exploitation
  • Selling of Fake Items
  • Inventory Control Problems
  • Concerns With Product Warranties
  • Delivery Problems
  • Quality and Product Issues
  • Violation of Data
  • Concerns with Product Security

You must be able to identify these hazards if you want to prevent becoming a victim of any of them.

It’s crucial to recognise that some of these hazards exist whether you run a traditional retail business or store or whether all of your transactions take place online.

In actuality, a large number of these dangers exist whether you run a physical store or a website.

Compliance With Regulations Is Crucial


In this industry, regulatory compliance is also essential, especially if you wish to conduct business responsibly.

The fact that it is much simpler to comply in a virtual environment is one of the reasons why many organisations decide to perform their complete sales process online.

Most importantly, customers don’t have to worry about traveling to a physical store to make a purchase, which might be risky if you deal with dangerous goods or offer a service that can’t be done at home.

Also, given the laxer regulatory compliance than traditional brick-and-mortar storefronts, several firms opt to operate online.

Although the convenience of conducting an online business is alluring, it’s crucial to make sure you’re not being dishonest or engaging in fraud.

Several websites will need you to follow a short, common series of procedures to confirm your identity before letting you make a transaction as a means of preventing this.

These security measures ensure that the person you believe to be interacting with you is the one with whom you are actually conducting business.

If a login and password are necessary, for instance, they must be precise.

Also, the website will ask you to confirm your address before mailing your order, which is another illustration of how problems might arise from a lack of identity verification.

The Value of Obeying Directions


How much you want to advance a specific industry is a key factor to take into account when deciding how to run your firm.

As these websites grow in popularity and attract consumers from all over the world, opting to operate in a virtual environment can often assist you to avoid becoming too big of a “fish in a small pond.”

As a result, your business may come under increased scrutiny; although you should be prepared for and potentially even anticipate this, it doesn’t mean you have to handle it all by yourself.

Despite this, the sector is still in its infancy and is struggling to get off the ground because these markets are so recent.

As a result, a lot of websites continue to insist that companies conduct the majority of their operations in a physical location.

Hence, if you choose to conduct your business digitally, you may have to “jockey for position” with other organisations that take the same course of action.

This could lead to problems if you’re not careful; specifically, if you choose an industry that is established and has a sizable customer base, you might find that succeeding is much harder than it was when you initially started out.

 This is why it’s wise to constantly do your homework before entering a reputable industry.

Finding a place where you can go from the start and keep an uncontested position is ideal, and this will be much simpler to do if you carry out all of your activity online.

Bottom Line

 Consumer confidence and the development of trust between businesses and their clients depend on a compliant and reliable financial environment.

Without it, you run the danger of losing important customer trust or having your firm shut down by regulators.

The various benefits that a digital KYC solution provides make it clear why so many financial institutions are embracing this kind of service.


About the Author

Tom Koh

Tom is the CEO and Principal Consultant of MediaOne, a leading digital marketing agency. He has consulted for MNCs like Canon, Maybank, Capitaland, SingTel, ST Engineering, WWF, Cambridge University, as well as Government organisations like Enterprise Singapore, Ministry of Law, National Galleries, NTUC, e2i, SingHealth. His articles are published and referenced in CNA, Straits Times, MoneyFM, Financial Times, Yahoo! Finance, Hubspot, Zendesk, CIO Advisor.


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