<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/Artboard-1-1.webp" alt="M2P Fintech" title="" width="100%" height="253">Stumped with KYC implementation?You are not alone. Several Financial Institutions (FIs) are working out their way through KYC puzzle to oust financial crimes and ensure compliance.Now, KYC is critical for any financial institution. It is indeed the first step when you choose to use a financial product or service in India.So, what is KYC?For starters, Know Your Customer (KYC) is the process to confirm a customer’s identity while onboarding a financial institution. RBI has ensured the implementation of a robust KYC system to helps financial institutions understand their customers better while ensuring their legitimacy. Click&nbsp;<a class="link au lg" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/" rel="noopener">here</a>&nbsp;to know more about KYC in India.<h2 class="heading-node" id="453f" style="text-align: justify">Digital Avatar</h2>With the rise in paperless onboarding, KYC has taken a digital avatar. The&nbsp;<a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/">digital KYC&nbsp;</a>saves a lot of time and effort involved in the process and helps tackle onboarding issues in a quick and seamless manner. It also prevents money launderers/fraudsters from masking their true identities and manipulating stolen information for their personal gains.Though the benefits of the process are immense, implementing digital KYC is not simple. Financial institutions such as banks and fintechs need to overcome significant challenges in deployment.<h2 class="heading-node" id="22ab" style="text-align: justify">Key KYC Challenges</h2>The upswing in the recent money laundering, fraud, and tax evasion cases has brought KYC into a new light. Accordingly, RBI has enforced strict laws concerning non-compliance with the KYC directives. However, financial institutions are grappling to keep up with the legal framework for KYC compliance.Experience Vs ComplianceRight from onboarding and screening to monitoring customer data, they face complex challenges every step of the way. This puts banks and fintechs in a tricky spot because customers seek seamless experience and quick onboarding with minimal documentation, and FIs cannot compromise on the verification process. Ensuring compliance without compromising customer experience is a huge challenge for FIs.Connected Risk IdentificationKYC involves extensive paperwork and supporting documents. Often, customer data files are incomplete or lack critical pieces of information or documentation. This heightens the risk of fraud and lays down a cosmic emphasis on monitoring and screening individuals and entities against Politically Exposed Persons (PEPs), watchlists/sanctions, and other regulatory and law enforcement lists.In addition, the rise of new criminal typologies has inflicted the compliance team to assess an overarching list of compliance and fraud risks. This calls for an all-inclusive, connected risk identification approach for analyzing financial fraud activities, money laundering, and other offenses.Volatile Risk AppetiteFinancial institutions and customers exhibit dynamic risk appetite. For example, a customer might have a different risk profile or status during onboarding and drift into another risk profile over time. On the other hand, KYC regulations are updated periodically, which implies the regulations, risk indicators, and other indices used to determine the risk tolerance score will vary. Hence the outdated records become an impending hindrance to the customer due diligence process. The repercussions of such instances are far-reaching as there is only a fine line between a medium and high-risk customer but a momentous difference in due diligence efforts.Lack of TransparencyOne of the biggest challenges of KYC is the retrieval of corporate ownership documents from registries located across the globe. Successful KYC depends on several sources such as annual reports, financial statements, stock exchange information, third-party data, and regulator websites. However, due to the lack of transparency, KYC analysts bank on limited information on the directors, stakeholders, controllers, and beneficiaries. Additionally, there is a significant cost associated with accessing specific vital documents while others are available for free.<h2 class="heading-node" id="6f0c" style="text-align: justify">How Financial Institutions can crack KYC challenges</h2>Here’s our take on how financial institutions can tackle KYC challenges effectively.<ul class="list-node" id="bakrf8m7x"><li>Integrate with credit bureaus for seamless customer verification</li><li>Use data deduplication techniques to recognize and eliminate identical records. This is also known as Dedupe check-in.</li><li>Validate customer data against the regulation records to identify unscrupulous individuals/organizations prohibited from making business transactions.</li><li>Conduct rational checks to keep a tab on anonymous bank accounts or those opened with fictitious names.</li><li>Facilitate video KYC for quick onboarding and exceptional customer experience.</li><li>Use algorithms and techniques to categorize customers as low, medium, and high-risk categories, based on the assessment and risk perception.</li><li>Take necessary precautions with customers who come under high-risk segment.</li><li>Monitor customer transactions in a routine manner to keep an eye on any suspicious activities.</li><li>Partner with authorized 3rd party service providers for quick e-KYC checks and video KYC onboarding.</li></ul><h2 class="heading-node" id="4cad" style="text-align: justify">Is third-party KYC partnership a viable approach?</h2>Although KYC is kept in-house traditionally, experts believe it is time to team up with third-party KYC-service providers.Why?First off, it is cost and time effective.Secondly, for high efficiency and accuracy.From dedicated subject matter expertise to cutting-edge technology access to faster go-to-market speed, third-party partners can provide all-inclusive services within an optimum budget.These partnerships can enable FIs to invest more effort and time in their core business, rather than focusing on the KYC procedures. Financial institutions that keep KYC in-house could end up with extensive duplication and redundancy across businesses and markets.On the other hand, third-party partners employ devoted professionals to carry out KYC procedures and documentation. This leaves no room for error, ensuring a smoother onboarding process and regulatory compliance, without compromising customer experience.With that being said, third-party service providers are the gateway to exceptional customer experience and successful KYC solutions. They enable financial organizations to improve speed and operational performance, minimize operational risks and boost efficiency by consolidating and centralizing functions.Financial institutions should take apposite measures to understand the complexities that could arise from digital transformation. They must embrace strategic partnerships to develop pioneering approaches to assess customer risks and monitor transactions.So, do you need solutions to any particular KYC issue? Or want to know more about implementing KYC?Write to us at&nbsp;<a class="link au lg" href="mailto:business@m2pfintech.com" target="_blank" rel="noopener ugc nofollow">business@m2pfintech.com</a>.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Crack the KYC Jigsaw. Ease Onboarding Compliance

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-8-8.webp" alt="M2P Fintech" title="" width="100%" height="383">Over the last few years, e-commerce and <a class="link" href="https://m2pfintech.com/blog/the-rise-of-digital-payments/" target="">digital payments</a> have become a comfortable cosmos for millions of shoppers worldwide. Card-Not-Present (CNP) transactions, in particular, constitute a major chunk of online payments.<h2 class="heading-node" id="cbf4">Card-not-present transactions</h2>Essential to both in-store and online businesses, CNP payments reduce the risk of customer churn and cart abandonment. Imagine a customer does not have a physical credit or has a visibly battered card that cannot be scanned. They can still pay for the purchase using the CNP facility across the counter or telephone or digital channels.But like most things in life, CNP payments are a double-edged sword. They are highly sophisticated yet so vulnerable to security breaches. When a scamster gets hold of the credit card number, name, three-digit security code (CVV), and expiration date, stealing cash and identity becomes a cakewalk.<blockquote class="block-node" id="o40ybrinh">As of 2021, CNP frauds were 81% more common than card-present scams, resulting in tremendous costs to banks and merchants.</blockquote><h2 class="heading-node" id="66f3">Cost of payment fraud</h2>The cost associated with payment fraud is immense for banks, merchants, and payment service providers. They’ll have to deal with customer refunds, additional chargeback fees, fines, and investigation charges. Though the amount is usually refunded to the victim, it still causes distress and mistrust.<h2 class="heading-node" id="b033">Best way to prevent CNP fraud — PCI 3DS</h2>The way to avert CNP fraud is to implement stringent controls that validate the identity of the cardholder. PCI 3D Secure plays a significant role in enabling identity validation and access control, thereby reducing the costs and inefficiencies associated with payment fraud in a CNP scenario. Banks and card payment service providers need to comply with PCI 3DS protocols to fortify transaction security.<h2 class="heading-node" id="deaa">What is PCI 3DS?</h2>PCI 3DS is an advanced EMV messaging procedure that authenticates cardholders when making online purchases. It facilitates seamless data exchange between merchants, cardholders, and card issuers, thereby providing an additional layer of security to avoid CNP fraud and make e-commerce secure.<h2 class="heading-node" id="f06c">Key components of PCI 3DS Core Security Standard</h2>The PCI 3DS Core Security Standard serves as a framework for EMV 3DS functions to execute security controls. It supports the integrity and confidentiality of 3DS transactions and pertains to institutions that leverage 3DSS, DS, and ACS, the key components of the PCI 3DS security standard.Here’s a quick peek into what each component means.•&nbsp;3DS Server (3DSS)&nbsp;contributes the functional interface between the 3DS requester environment and the DS.•&nbsp;3DS Directory Server (DS)&nbsp;holds the list of valid card ranges for which authentication may be available. Further, it also coordinates communication between the 3DSS and the ACS systems to ascertain whether authentication mechanisms are available for a particular card number and device type.•&nbsp;3DS Access Control Server (ACS)&nbsp;comprises the authentication rules and is managed within the issuer domain.The physical and logical security requirements for the PCI 3DS Core Security Standard are structured as follows.Baseline Security Requirements<ul class="list-node" id="qtc61d1ze"><li>These are technical and operational security requirements that reflect general information security principles and practices common to industry standards.</li><li>These requirements should be considered for all types of environments.</li></ul>3DS Security Requirements<ul class="list-node" id="qgbh7rkln"><li>They provide security controls specifically intended to protect 3DS data, technologies, and processes.</li></ul><h2 class="heading-node" id="1289">Difference between PCI 3DS and PCI DSS</h2>The PCI 3DS and PCI DSS are two separate standards intended for varying requirements and entities. The PCI 3DS applies to environments where 3DSS, ACS, and/or DS functions are performed, whereas PCI DSS applies wherever payment card account data is stored, processed, or transmitted.If you want to know more about PCI DSS, check out our blog on the&nbsp;<a class="link au nb" href="https://medium.com/m2p-yap-fintech/12-requirements-of-pci-dss-157747451888" rel="noopener">12 REQUIREMENTS OF PCI DSS.</a>Most 3D secure entities possess both PCI 3DS and PCI DSS responsibilities. In some cases, a 3DS entity does not store, process, or transmit any payment card account data. For instance, in the case of EMV payment tokens, the 3DS entity is involved ONLY in 3DS transactions. The 3DS entity may not be subject to PCI DSS in this scenario. In all other cases, entities should refer to their acquirer and/or the payment brand(s) to determine their compliance obligations to a PCI standard.So, are you looking to get PCI DSS certified and compliant? We can help.<a class="link au nb" href="https://m2pfintech.com/" target="_blank" rel="noopener ugc nofollow">M2P</a>&nbsp;has extensive experience in ensuring compliance for numerous players in the card payment industry. Write to us at&nbsp;<a class="link au nb" href="mailto:business@m2pfintech.com" target="_blank" rel="noopener ugc nofollow">business@m2pfintech.com</a>, and let’s get started!Here’s to more dynamically authenticated 3DS transactions!<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Prevent CNP Frauds with PCI 3DS

3D Secure: Your Barrier against Cyber Attacks

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Wordpress-main-.webp" alt="M2P Fintech" title="" width="100%" height="356">Know Your Customer/Know Your Client (KYC) is a mandatory process that verifies and authenticates a customer’s identity. All legal and financial institutions must validate their customers to prevent any illegal or fraudulent activities as per Reserve Bank of India’s norms.&nbsp; Under the guidance of the Prevention of Money Laundering Act, 2002 (PMLA), the RBI mandates that all banks and financial institutions implement KYC procedures.&nbsp; KYC starts with verifying Proof of Identity (POI) and the Proof of Address (POA) and by which banks, insurance companies, and other organizations obtain information and better understand their customers. It is applicable for both new and existing customers and is the first step in account creation or even to allow a transaction.&nbsp;<h2 class="heading-node" id="9083">Why is KYC mandatory?</h2>As per the Reserve Bank of India’s mandatory regulation, KYC came into legal effect in 2002. The RBI mandates that all financial and legal institutions should assess their customers.&nbsp; KYC’s objective is to help banks and other financial institutions to assess and validate their customers. An effective KYC alleviates and combats all illicit activities. A financial institution can identify potential threats, criminal, and other illegal activities while verifying the KYC required documents. In a nutshell, a financial institution or a business/corporate uses KYC for,&nbsp;<ul class="list-node" id="32oq3a921"><li>Building and Verifying a Customer’s Identity&nbsp;</li><li>Understanding Customer’s Activities&nbsp;</li><li>Evaluating the risks involved with the Customer’s Activities</li></ul><h2 class="heading-node" id="2ff5">How does KYC work?</h2>The KYC process is carried out seamlessly with the following simple steps:&nbsp;<ul class="list-node" id="pce88galo"><li>First, the applicant’s PAN/ AADHAR details are collected and validated.&nbsp;</li><li>The applicant further supports the information provided by entering the required details on the website.&nbsp;</li><li>The applicant’s document goes through various checks and authentication processes by the financial entity.&nbsp;</li><li>Once the documents are verified, and once named eligible, then the applicants are onboarded.&nbsp;&nbsp;</li></ul><h2 class="heading-node" id="23fe">Evolution of KYC</h2>Back in 2002, the Reserve Bank of India (RBI) made KYC a legal and mandatory procedure for all financial institutions, preventing misuse of the sensitive information held by banks and restricting money laundering activities. Evolving from a Paper-based physical attestation method to video adoption, KYC has come a long way. The paper-based KYC demands more physical input because of various document requirements. In contrast, the e-KYC makes the verification procedure less complicated by reducing the physical work of businesses and clients where the data is stored and verified entirely online.&nbsp;&nbsp; The e-KYC or paperless KYC verification procedure became more preferred by customers once the internet boomed. Now doing e-KYC is made even more accessible as the Government of India has launched Digi Locker under its Digital India initiative. It is a digital document wallet that helps its users to store authentic documents virtually and is highly secured by Aadhaar/OTP authentication.<h2 class="heading-node" id="5fbe">Types of KYC</h2><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Wordpress-03.webp" alt="M2P Fintech" title="" width="100%" height="284"><h3 class="heading-node" id="ympukq7zn">1. Aadhaar-based KYC</h3>Aadhaar-based KYC verification follows the regulations of The Unique Identification Authority of India (UIDAI) and verifies proof of identity and residence through one’s Aadhaar number. In addition, the UIDAI provides information to service providers to activate customer services such as bank accounts, mobile connections, etc.&nbsp; Every Aadhaar cardholder can quickly and easily complete their KYC process. Aadhaar based KYC is an efficient, paperless process that adheres with government standards.&nbsp; The Aadhaar based KYC authenticates data in two different ways:&nbsp; OTP-based  - The financial institution verifies the customers’ identity by triggering an OTP to their Aadhaar linked mobile number.&nbsp;&nbsp; Biometric-based  - For Identification and Verification, the financial institution uses the biometrics of the customer by using UIDAI (Unique Identification Authority of India) approved scanners.<h3 class="heading-node" id="ebxjgryx3">2. In-Person Verification (IPV) KYC</h3>The In-person KYC procedure was used by the Security and Exchange Board of India (SEBI) for mutual fund investors. Unlike the other prevalent methods, in-person verification requires the individual to undergo the process offline in an institution, KYC kiosk, or at an AMC. IPV has now upgraded their process via OTP mechanism.<h3 class="heading-node" id="31fd">3. Digital KYC</h3>It is a paperless process where a live photo of the client and their Aadhaar is verified and processed online. It also involves submitting the Official Valid Documents (OVD’s) such as Aadhaar, Pan Card, Passport or a Driver’s license.&nbsp; The digital KYC techniques have many advantages such as,&nbsp;<ul class="list-node" id="pewatsdgk"><li>The customer’s identity verification happens in real-time,&nbsp;</li><li>The process is flexible because the customer can use any of the OVDs,&nbsp;</li><li>The process is highly secure and efficient due to privacy laws and the usage of AI technology.&nbsp;</li></ul><h3 class="heading-node" id="0da4">4. Video KYC</h3>RBI allowed the usage of Video KYC in 2020 due to the pandemic constraints. Video KYC is a procedure that verifies details of the client in a video-based process. This process involves an auditor and an agent for authentication and audit. Before establishing an account-based relationship, the agent collects the details using video-audio features and AI technology. The process is smoothened by usage of a number placard that helps authenticating the customer.&nbsp;&nbsp; Video KYC is available as:&nbsp;<ul class="list-node" id="dd9lh3yyz"><li>VCIP - Video-based Customer Identification Process&nbsp;</li><li>VIPV - Video-based In-Person Verification&nbsp;</li><li>VBIP - Video-based Identification Process&nbsp;</li></ul>&nbsp;It employs a trained individual’s audio-video interaction and automated verification methods such as geo-tagging and facial matching.&nbsp;<h3 class="heading-node" id="4d8e">5.&nbsp;Central KYC (CKYC)</h3>CKYC is a customer or financial institution submitting a Central KYC form and proof of identity and proof of address that relies on the central repository of customer records for CERSAI (Central Registry of Securitization Asset Reconstruction and Security Interest of India). The process detects any duplicate accounts and mitigates other risks.&nbsp; The C-KYC identifier is a 14-digit unique identifier assigned to a client when they upload their details for KYC. When a client opens an account without C-KYC, it may require them to repeat the whole process. But this 14-digit identifier removes that need, and the customer can use this number to update their information throughout all their accounts uniformly.<h3 class="heading-node" id="4feb">6. In-app KYC&nbsp;</h3>This KYC process brings out easy and hassle-free experiences to the customers. All the verification process happens with the help of a smartphone, where the clients can conveniently carry out bank transactions, open bank accounts, and other banking operations.&nbsp; The clients need to use their smartphones to verify their IDs or passport and begin the KYC process. The KYC also involves real-time scanning of IDs to prevent identity forgeries. It is highly secure due to the deployment of secure technologies.<h3 class="heading-node" id="a37c">7. Offline KYC</h3>Offline KYC requires the submission of all the necessary physical documents for verification. It requires filling in all the required details like Aadhaar and PAN. After this, the client must visit a nearby KRA to complete the process and receive an official application number to identify and continue the verification process. Or an agent is sent to the customer’s place to collect documents for KYC verification.<h2 class="heading-node" id="649c">So, what is KRA?</h2>KRAs are KYC Registration Agencies that maintain the SEBI (Security and Exchange Board of India) registered companies records under the KYC regulations Act, 2011. To bring uniformity and avoid duplicate KYC processes, this KRAs help regulate the KYC process that allows a company to authenticate its clients and offer better customer service.&nbsp; Five different agencies that work as KRAs in India are:&nbsp;&nbsp;<ul class="list-node" id="83rt2nv4f"><li>CVL KRA&nbsp;</li><li>CAMS KRA (Computer Age Management Services Pvt Ltd.)&nbsp;</li><li>NSDL KRA (National Securities Depository Ltd)&nbsp;</li><li>Karvy KRA (Karvy Data Management Services)&nbsp;</li><li>NSE KRA (National Stock Exchange)&nbsp;</li></ul>To conclude, KYC has evolved over the years from physical forms to real-time AI technology verification methods. KYC satisfies and provides a hassle-free experience to the customers and helps financial service providers establish a smooth relationship. If you wish to implement a robust KYC system, check out our blog on <a class="link" href="https://m2pfintech.com/blog/crack-the-kyc-jigsaw-ease-onboarding-compliance/">How to Crack the KYC Implementation.</a><a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Tag: "Vas (13)"

M2P Fintech