Know Your Customer (KYC) is the process of verifying the identities of customers in order to comply with regulations and mitigate fraud, and this has always been performed manually. However, technological innovation has led to digital KYC, which is a more effective method of performing KYC checks. Businesses now have two ways of verifying their customers' identity.
This article will explore the differences between manual and digital KYC, their benefits and limitations, and how choosing the right KYC method can improve efficiency, reduce costs, and enhance security.
What is Manual KYC?
Manual or traditional KYC is the process of verifying a customer's identity through physical means. Businesses that use manual KYC to verify identities deal with tons of paperwork, and their customers have to come to a physical office to submit their documents as part of the verification process.
For manual KYC to work, businesses need to have an expert and dedicated workforce that will verify each customer. This team will also be responsible for spotting forged documents.
What is Digital KYC?
Digital KYC is the process of verifying a customer's identity remotely. There are three major ways of performing digital KYC: analyzing government data, analyzing identity documents, and using biometric information.
The first approach involves checking a person's identity data like name, BVN, and NIN and comparing them against trusted data sources to ensure the user is genuine.
The second method involves analyzing digital images of identity documents that were captured through a phone or PC to determine if an ID is authentic and if it matches the person who submitted the image.
The biometric approach involves performing biometric verification on customers by using fingerprints or a liveness check to ascertain their identity.
Digital KYC vs. Manual KYC: Which is Better for Your Business?
Let's dive into the key differences between the two KYC methods and see which is better for your business. Doing so will help you to make an informed decision.
Manual KYC is more vulnerable to different fraud schemes than traditional KYC. It relies on human judgment and the ability of the human eye to detect forged documents, which can lead to errors and mistakes. Also, with manual KYC, there is no way of stopping fraud before it happens because it does not provide any means of setting up automated fraud detection alerts. Fraudsters can easily exploit the loopholes of manual KYC to gain access to your business.
On the other hand, digital KYC provides more robust and foolproof security than manual KYC. It relies on advanced algorithms and data analysis to accurately verify customers. Also, you can easily detect fraud in real time and use AI and ML technology to spot suspicious activity and stop fraud before it happens.
Efficiency and Speed
Manual KYC involves storing and extracting data into large amounts of physical documents. Not only can documents get mixed up, stolen, or missing, but it is also a time-consuming process.
On the other hand, digital KYC uses tools like Optical Character Recognition (OCR) to automate and speed up the document-handling process. This significantly reduces the time and effort required to verify a customer's identity and allows your team to focus on more important tasks.
Customers today expect seamless, hassle-free experiences when dealing with businesses. Manual KYC can be cumbersome and time-consuming, which may lead to frustration and drop-offs during the onboarding process. By streamlining the onboarding process and providing instant verification, Digital KYC provides a more positive customer experience, increasing the likelihood of successful onboarding and long-term loyalty.
Another benefit of digital KYC is that it is more cost-effective for businesses. Manual KYC requires significant resources like hiring and training dedicated staff to handle the KYC process and renting office space and equipment to store documents. With digital KYC, businesses can save on these costs and allocate resources to other activities.
A huge limitation of manual KYC is that it is difficult and expensive to scale with it. While businesses with tens or hundreds of customers can launch with a manual KYC process, it will quickly become inefficient as their customer base increases. However, with digital KYC, there are no limits to how far you can scale and grow your business and how many customers you can onboard and verify.
Deploy Dojah's Digital Onboarding and Verification Solutions
Leverage Dojah's onboarding and verification solutions to make the right first impressions with customers and sustain long-term relationships. Stay secure while providing the best onboarding experience with Dojah no-code tools, widgets, and APIs.
Start verifying your users with ease today. Contact us if you have any questions or schedule a demo session. Explore our website and documentation to learn more about our product offerings.