A Centralised & Digitised Know your Customer ecosystem is quite beneficial in the new age digital economy.

It helps quickly onboard customers and avoids duplicates w.r.t submission of documents. That is not all, it helps reduce acquisition costs and improves compliance.

In the long term, it also helps in making KYC truly effective and rationalise (close) on the number of accounts people retain. In fact, Offboarding (account closure) is one of the key stages in FDLC, under 3F: Future Fintech Framework, as it adds to compliance costs, can be reason for frauds and a means to ensure financial discipline.

Sharing some of the following pointers to make an effective centralised and digitised KYC Platform: -

a. Need to link the KYC with the Digital Identity ecosystem. In many countries the digital identity ecosystem is evolving and even mature, we need to effectively weave it with Centralised KYC.

b. Using techniques and technologies like Video KYC, Geo Tagging, Liveness detection etc.

c. API based Validations and verifications using bills and other digital ID’s can also be enabled. Even a centralised document locker will greatly enable this.

d. Big data and access to social media can also be considered based on value add, compliance and customer consent.

e. KYC is not just one time and needs to be a regular exercise.

f. There has to be regular monitoring and data sharing amongst entities.

g. We need to also have in person verification, to establish and verify, presence and location respectively. This can also be used for background checks.

h. Levels of KYC needs to be established, using both digital and physical means. For e.g. Level 1 KYC for basic accounts (simplified KYC process), Level 2 accounts (Slightly more stringent KYC), Level 3 accounts (Most stringent KYC). This can be based on products, limits of usage, account balance, customer risk category etc. and is a must, else it will be costly and inconvenient.

i. KYC is a cost and usually borne by the entity onboarding the customer. Instead, a system where a nominal charge is levied per account based on Level of KYC, should be followed. Entity onboarding should bear the costs till some limit and for additional accounts costs can be levied on customers. Say max. 3 savings account and if someone is opening a 4th then charges is levied. This can be product based too. This will rationalise / optimise use of KYC & also have some indirect impact on mis-selling or forced selling.

j. It will help if a set of centralised KYC agencies run this system, with financial institutions and others participating. It is like offering KYC as a service.

Few countries have taken measures to address some of the above, but a true centralised and digitised KYC is still a long way ahead. It is thereby imperative to take a more comprehensive view on the same and that is what will make the whole KYC process more efficient and effective.