It’s estimated that according to the Thomson Reuters 2016 KYC Survey, globally banks spend US$60 million each year and some banks in the US, reporting an average of US$1.5K being spent on total customer acquisition costs, according to The Financier. Much of this is due to (a) cumbersome requirements to collect physical documents, and (b) requirements to collect these documents from the clients in a face-to-face manner.
Providers of digital identify verification and opened the door to dramatic cost savings in this space. Take it a step further and embed the digital identity details of clients into the blockchain, and you’ve got an immutable, time stamped version of the truth.
A common part of the KYC check is to obtain verified copies of client identity documents. Traditionally this would mean taking a copy of your passport, and having the copy verified by a Justice of the Peace, a Police Officer or some other public official. Both a costly and time consuming exercise. ShoCard is one of a host of service providers now offering online digital identity validation services. By using a combination of photos of government identification and blockchain technology, the services offered by ShoCard are something that global banks can consider to build into their KYC processes.
In 2016, the India government undertook an initiative to issue the entire population of the country, a unique identification number, based on a verified digital identity. Aadhaar was the name given to the initiative, which involved 10 digit unique identifiers being issued to each member of the population based on a fingerprint and retina scan.
Whilst still in the early stages of adoption, through digital identity verification, clients are likely to see a number of changes when it comes to opening accounts. First and foremost is that physical documents won’t need to be completed, verified and collected by the bank.
Shareholders of banking will likely also see some positive changes to the bottom-line of their investments. A move to digital is likely to see a number of traditional costly banking processes become more streamlined; headcount numbers of onboarding/KYC teams is likely to be thinned out as the amount of ‘heavy lifting’ would be reduced by collecting pre-validated digital documents from clients. As digital adoption of onboarding is taken up, the requirement for clients to actually walk into a branch will reduce; when most banking services can be performed online, the need for physical branches is reduced – once again, another option to reduce costs. The final benefit that we’ll cover, is derived from both the digital onboarding and removed reliance on physical branches; access to new geographies where it was previously uneconomical to enter the market due to the sheer cost of setting up and maintaining a physical presence.