Complex regulations and evolving digital payment landscape require financial services to rethink eKYC
Customers want digital banking services and they want them now.
With smartphone and internet penetration soaring and customers choosing to do everything online, bankers are under pressure to deliver on rising expectations.
This is especially true in the Asia-Pacific region, where leading think tanks including McKinsey forecast that financial institutions that fail to digitize will risk disappearing. Moreover, the COVID-19 pandemic which has resulted in widespread closure of branch offices, has further expedited the need for digital transformation.
Traditional banks and institutions, therefore, need to act quickly.
The new reality is that fintech companies, digital-only banks and traditional banks are all in a race to debut innovative, convenient and secure digital-first products and solutions, in a bid to win and keep customers, across a number of generations.
The competition in Asia-Pacific is set to intensify with the uprising of newly licensed digital banks. Alongside, the whole sector is receiving clarity and guidance from the regulators about eKYC compliance standards.
In the last two quarters of 2019, Singapore, Hong Kong and Malaysia made significant progress with digital banking — and the landscape is set to get interesting in the coming months as technology innovators such as Grab, ByteDance, Ant Financial and Singtel, launch their own digital bank offerings.
Traditional banks are also bolstering their digital portfolios with support from leading technology vendors.
CIMB Group, for example, launched its digital-only bank in the Philippines and signed up almost 2 million Filipinos via the CIMB Bank PH digital platform in its first full year of formal operations. Through partnering with Jumio, a global provider of AI-powered end-to-end identity verification and authentication solutions, CIMB Bank PH is able to provide a safe and convenient digital banking experience for its online customers.
Understanding the true cost of digital onboarding
Today, while organizations are racing to launch their own digital offerings, the reality is that there will be no success if the customer experience delivered is not up to the mark.
Customers have options, especially in today’s environment, and since most offerings in the financial services space have like-for-like substitutes, there’s a significant chance that a poor online experience will cause customers to look elsewhere, be it at the onboarding stage, checking their account balances, depositing and withdrawing funds or while authenticating high-risk transactions.
Identity verification is the first step and also the most crucial aspect of eKYC as it verifies the online user’s real identity. As explained in a recent whitepaper by Jumio, there are three main components that make up the total cost of ownership when it comes to identity verification: identity verification costs, manual review costs and cost of customer abandonment. And it’s the last one that dwarfs the others in terms of bottom-line impact. Jumio’s study discovered a counter-intuitive finding: The total cost of ownership (TCO) of an integrated eKYC solution was almost a quarter of an automated solution per 1,000 verifications.
An analysis of what contributes to the TCO reveals that the major difference between the two kinds of solutions is attributable to the fact that an integrated eKYC solution, despite the marginally higher vendor cost, lessens the need for manual verifications and dramatically reduces abandonment rates because they deliver a significantly better user experience.
Given the rising competition in the digital banking market, bankers cannot afford to have a challenging eKYC process that makes onboarding difficult. That’s the easiest way to lose a customer and sacrifice an important business relationship.
Once the damage is done, the incentive that must be offered to win back the customer is too high.
Whether already providing a digital solution, or just beginning to level up, financial institutions and fintech startups need to focus on refining and building smarter eKYC processes – to reduce costs and optimize the onboarding experience.
Jumio’s latest whitepaper offers more insights on the current state of digital banking in Asia-Pacific and best practice approach to streamline digital onboarding experience while complying with eKYC regulatory requirements. Download a copy now.