Electronic Know Your Customer (eKYC) is the technology that directly addresses a common customer complaint about an important security guideline enacted by financial services. As with most new technology, it is designed to simplify a complex process by adding digital innovation to a problem that has long been analogue and somewhat old-fashioned.
In case you don’t know, KYC is the process of proving that you are who you say you are. Perhaps you’ve called your bank or some other institution holding private information about you at some point and been asked to quote dozens of numbers and codes, listed various personal facts and details and answered countless secret questions? That’s KYC - it’s the means by which the institution can know that you are indeed their customer and that it is safe to allow you to access the account. All eKYC does is make that process significantly easier.
What exactly is eKYC?
Technology has leapt forward significantly in the last few decades and slow-moving institutions have been left in the dust. Among the slowest are banks and other financial services. The reason for their hesitance to move with the times is entirely logical and even praiseworthy - they value stability above all else. The tried-and-tested approaches to things like KYC are safe and well-established, so why fix what isn’t broken, right? Well, there’s the problem: it is, increasingly, broken.
For example, KYC has traditionally required customers to produce proof of their address, generally in the form of a recent utility bill. But what if your customer doesn’t have a fixed address? They might be a digital nomad or retired and living in an RV. Does that mean they can’t have a bank account? Not having a bank account is virtually impossible nowadays since it puts a huge amount of valuable services out of your reach.
The other major hindrance of traditional KYC is that it effectively requires you to physically go to the bank in person in order to achieve anything. But what if that isn’t possible? The customer might be travelling or living overseas or may need urgent access to their account outside of office hours. They might live remotely or be disabled to the extent that reaching a bank branch becomes so hugely inconvenient that it is effectively impossible. They might even just be a busy person who can’t afford to waste time on the journey to and from the bank.
While it is possible to use KYC on the phone, it runs up against the problem that the bank can’t tell by your voice that you are who you say you are. They have no way of knowing you just by your voice. That is why they ask you to quote all of those numbers and answers and details. Of course, the problem is that adding more security requirements makes the process both more and less secure at the same time. Who can possibly memorise all of those details? They are surely likely to write it all down in a convenient book, where any unscrupulous person can find it and use it to their own advantage.
So, what exactly is eKYC? The simple answer is that it uses modern technology to provide a simple and secure way of giving the bank the same assurance that they used to get from all of those codes and questions. It takes advantage of the features that every smartphone now possesses and ensures that customers can access their account safely, quickly and remotely.
How does eKYC work?
What does a modern phone have that they did not have before? Among other things, cameras. These solve that one problem that KYC always had when it came to being certain that the person giving out their complete life story over the phone is actually the person who owns the account - the fact that it is impossible to prove your identity with just your voice.
In its simplest form, you can use eKYC by taking a photo of some form of official ID (driver’s license, ID card, passport, etc.) with the forward-facing camera and then taking a picture of yourself with the selfie camera, Assuming that the image on the ID is a good match for the selfie, and that both match the ID used to open the account and set up the eKYC, it’s a fair assumption that the person using the phone is the right person and that it is therefore safe to give them access to the account. With the use of the sort of facial recognition software used in some modern phones, this whole process can be completed without the need for anyone at the bank to verify the customer’s identity, making it possible to use the service at any time of the day or night.
That’s it. The whole process can be completed in less than a minute and requires that the customer just has one very common form of picture ID on them - the sort of thing they would generally carry either out of legal obligation (as is the case with the Thai ID card) or convenience (as with the driver’s license).
Why is eKYC important to have?
KYC is already an essential component of the security measures for any kind of financial institution. Many countries require it to be part of the process to prevent fraud, money laundering and bribery, among other financial skullduggery. It is even required by money remittance service for sending cash overseas.
But that doesn’t answer why eKYC is essential. As we said before, the old system may be clunky and inconvenient and it makes life extremely difficult for a small percentage of people, but it is still functional. The fact that some companies are starting to use eKYC means that others are strongly advised to follow suit in order to avoid losing customers because people will always gravitate towards the options that make their lives easier, but that is still not essential.
The outbreak of COVID-19 and the global response illustrated exactly why eKYC is a must. As part of nationwide shutdowns, many financial institutions were required to shut their branches. Even if they remain open, the requirement for social distancing makes visiting a branch in person inconvenient at best, potentially life-threatening at worst. However, financial services are still required; people still need to complete transactions, pay bills, send money overseas and so on, but they need to do so without leaving their home. This is where eKYC becomes a literal life-saver.
Is eKYC secure and safe to use?
The value of KYC in its current form is in the sheer volume of information required. No casual fraudster is going to go to the effort required to figure out every single piece of personal information required in order gain access to someone else’s account, right? Of course, a surprising amount of that information is widely available. From Facebook alone, you could probably figure out the average person’s date of birth, address, phone number, mother’s maiden name, the names of their siblings and pets and several other forms of personal identifying data.
As for the rest - the various codes issued by the bank when you register for phone or internet banking, the chances of the average person memorising all of that are pretty slim. People already have too many passwords in their life, to the extent that password vaults are increasingly widely used. For older generations, that vault takes the form of a little booklet of passports kept right next to the computer, where any enterprising burglar can swipe it. Put simply, while KYC is currently as secure as it can be, it’s not invulnerable.
eKYC, by contrast, requires that the customer is holding their government-issued ID, has access to their phone (many of which now have fairly sophisticated locking mechanisms, ranging from something as simple as four-digit PIN up to facial recognition systems) and is able to take a photograph of themselves. Short of kidnapping, there are not too many ways that those requires could be met dishonestly.
There is even a liveness test involved in the process to ensure that a still image of the customer isn’t being used in place of them taking a selfie. The test tracks eye movement, facial features and changing light conditions - all things that would not change on a still image.
Will eKYC ever work in Thailand?
So far, India has been the big innovator in the field of eKYC. Both the government and banks have already started using this process to speed things up and make life easier for everyone. While Thailand’s banking institutions are not famous for being world-leaders when it comes to innovation, eKYC is one area that big steps are already being taken.
The subject was already hitting the news in mid-June 2019 and, as of February 2020 six of the leading banks in Thailand have the authority from the Bank of Thailand to start testing the technology. Those six banks are Bangkok Bank, Kasikornbank, Siam Commercial Bank, Bank of Ayudhya, TMB Bank and CIMB Thai Bank.
This is part of the process of the Thai government shifting to digital platforms and modernising their processes. The banks will be able to use eKYC in conjunction with the National Digital ID (NDID) platform. While registering for the service will require a visit to a bank branch, doing so will mean that you won’t need to go in person to confirm your identity again. Siam Commercial Bank is going one step further by working with Counter Service Co to allow customers to use the same technology at 7-Eleven convenience stores.
So, it isn’t so much a case of “will eKYC ever be adopted in Thailand?” as “when will it be fully operational?”
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