Know Your Customer, or KYC is a very important process for businesses to validate the credentials of customers before they can avail of any service or product. KYC is now a common technique used by insurance firms, banks, and other financial institutions. It is a mandatory requirement for coping with industry regulations and customer authentication policies.
In India, KYC was made mandatory in 2010, but RBI norms upon it were imposed a lot earlier! All the financial service providers have adopted it to prevent any kind of fraud or money laundering problems in the industry. But over time, paper-based KYC became a daunting task, hampering the consumer experience.
In addition, it took a lot of time for financial institutions or service providers to complete the process, which delayed the service offerings for end-consumers. Therefore, Aadhaar-based e-KYC solutions were introduced to the market to speed up the process without hampering the validation process.
In this article, you will get an insight into how Aadhar-based e-KYC has helped financial service providers offer their services or products more conveniently.
Understanding Aadhaar-Based e-KYC
Aadhaar-based e-KYC is known as the digital version of KYC, where identity is verified using the Aadhaar credentials issued by UIDAI. With this, the individuals will have the flexibility to validate their identity over the financial service portals without needing to submit any physical documents or connect with any human agent.
With this, the biometric and demographic details of an individual will be uploaded directly to the bank or financial service provider’s server. It is a secure and efficient ID verification technique where the end customers are in control of authorising the third-party companies to access their Aadhaar details digitally.
Thus, the chances of human errors are reduced, which enhances the convenience and speed of the overall verification process. There are specific industries that can preferably use Aadhaar-based e-KYC to make their services or products available to consumers. Some of those industries are:
● Banks, Insurance Firms, and Financial Institutions
● Stock Exchanges and Stock Brokers
● Trading Account Creating Platforms
● LPG Gas Providers
● Utility Service providers
How Does Aadhaar e-KYC Works?
The purpose of e-KYC is to make the identity verification process paperless. With this implementation, your FinTech business services can be offered to the customers by verifying authenticity through the Aadhaar platform. Any business that intends to verify the identity of a customer can make use of the e-KYC API on their platforms.
The customers will be asked to enter their Aadhaar Card credentials in the asked verification fields. Following that, an OTP will be sent to the registered number. The customer will then have to enter the same to allow the third-party financial service provider to store and access the Aadhaar details. Thus, the need for in-person validation is completely eliminated!
For instance, if you are a Neo Bank startup that allows users to open a digital bank account, you would want your customers to produce some authentication documents mandatorily. Now, as a Neo Bank, you must offer digital validation services where customers don’t have to deal with manual documentation. Aadhaar-based e-KYC will help your customers open their accounts in just a few seconds!
Benefits of Aadhaar-Based e-KYC
Now that you are aware of how the Aadhaar-based e-KYC works, it is important you get an insight into the benefits of it for your business:
1. Provide Services Upon Verified Information
Upon successful Aadhaar e-KYC authentication, the user’s information will be retrieved from the UIDAI database. Once the information added to your business portal gets validated with the Aadhaar details, there isn’t any necessity for added authentications. The data present within the UIDAI database is already verified, which makes the information trustworthy.
2. Consent-Based Authentication
As a financial service provider, it is important to help customers understand their rights to share information. Aadhaar-based e-KYC will be initiated and completed only when your customers give their consent through an OTP.
3. Better Security
The customers can feel secure about sharing their Aadhaar information with third parties. It is because UIDAI allows this facility of implementing Aadhaar-based e-KYC only to authorised agents or registered financial institutions. In the case of offline KYC, the biometric scanners issued to the firms are also verified to ensure an even more secure approach.
As a business, you must look out for all possible options that can minimise your operating costs. One way, the papers used for physical KYC somehow demand you to spend on inventory, manpower, cardinal, and others. Switching to Aadhaar-based e-KYC will help you save on all of those costs.
5. Be Safe from Fraud
When a digital request is made to the UIDAI for information related to a user upon his/her consent on Aadhaar e-KYC, you will be provided with a tamper-proof electronic document. This document will have all the recorded information of the user as per his/her Aadhaar data. Thus, the chances of digital fraud will be completely eliminated. As you are going paperless with your KYC needs, the chance of manipulation or forgery of documents is nowhere a question.
Aadhaar-based e-KYC is in the limelight for a lot of reasons, the biggest one of which is to prevent the misuse of consumer data and fraudulent activities. The rise of NBFCs (Non-Banking Financial Companies) has increased the demand for open banking and e-KYC API integrations. FinTech startups are now being supported immensely by the Indian government to improve the digital payments landscape of the country.
In the process of motivating people to incline towards availing financial services online, there is a need for specific service-related APIs. With a company like FidyPay at your back, you needn’t worry about making those integrations. If you are a FinTech startup and want to cater to your audience by allowing them easy onboarding to your platform, we can integrate the Aadhaar-based e-KYC API right away.
Following that, we also have a lot of other service APIs for you to avail and increase your business exposure among the targeted audience. Get in touch with our team to learn more about our e-KYC and other API integration services.