If you are an Indian or have had any financial transactions (online or offline) you must be familiar with the concept of updating your KYC. In case of retail banking and other digital wallets, it has already been made mandatory for a seamless experience. The customers could update the details offline or using e-KYC. Now, the same online procedure has been extended to other financial institutions as well – brokerage firms and fintechs.
In its recent circular, the Securities and Exchange Board of India has issued a circular regarding the process to be followed for Aadhaar-based electronic KYC exercise for domestic investors. According to the circular, direct investors can simply go to the AMC’s website and use Aadhaar to do the e-kyc process.
Advantages of Aadhaar e-KYC Services
- Instant and online verification – no more long waiting time
- Secure and safe way to submit documents with KUAs
- Data security & privacy maintained with UIDAI’s internal encrypted software
But, What does it Mean for Businesses?
#1. Faster Onboarding of Investors
Good news for all the mutual funds and brokerage firms, as with the Aadhaar eKYC being allowed, it encourages more investors to join the bandwagon. The trends saw a decrease when the Supreme Court disallowed the use of Aadhaar data for financial transactions. Which meant that a Permanent Account Number (PAN) was mandatory for every investor KYC.
#2. Customer Experience
Doing away with the need to depend on offline channels for KYC verification, things have been simplified for the customers. Now, they do not have to wait in long queues to submit the hardcopy of the forms and then not having proper tracking mechanisms too. The move is particularly well appreciated by the millennials who prefer the digital world rather than having to go from center to center.
#3. Cost of Acquisition
With the option of Aadhaar e-KYC the mutual fund and brokerage firms can significantly reduce their cost of customer acquisition. Earlier the firms had to incur the cost of hiring field agents and setting up kiosks at various locations to get new customers. This number can now be reduced which will eventually have a positive impact on the bottom line.
#4. Higher Small Town Penetration
It is a great opportunity for the investment firms and banks to tap into the semi-urban and rural population to increase investment penetration. These people have already got their bank accounts mapped to their Aadhar cards, so onboarding them towards small investment schemes like SIPs will become easier. Moreover, this is also an effective way to increase awareness about the need for investments and basically widen the clientele base while doing good for the society.
Conclusion - Is that It?
While e-KYC is a positive move for the people in general, but we cannot forget about a large chunk of our population which prefers the more conventional way of handling their financial transactions and investments. This more mature and aged strata is not as tech-savvy as the millennials. So, the bottom-line is, that going digital might be the right thing to do, but the growth needs to be inclusive.
RBI has recently permits the Video KYC as a method of customer identification. Video based KYC is cost effective and saves lot of time. Ameyo is recently launching Video KYC to improve the customer onboarding process and the solution is fully complies with RBI V-CIP regulatory guidelines.