What is eKYC? Exploring Digital Verification and Identity Authentication

Know-your-customer (KYC), sometimes called know-your-client, processes are familiar among banks and financial institutions as they’re a regulatory necessity in the industries. They often involve a mix of physical documentation-based and electronic methods for document verification and customer identification to reduce financial crime.

Electronic know-your-customer (eKYC) takes KYC a step further by digitizing the entire process through biometrics and other means, or a combination of electronic methods.

As eKYC grows more prevalent, it behooves banks, financial service providers and other organizations that require airtight ID verification to prevent fraud, understand the technology and consider how they might implement it.

This blog serves as a guide to eKYC, exploring the fundamentals of the technology, major use cases, its benefits, challenges and more.

What is eKYC? The Fundamentals

The traditional KYC process is often extensive, siloed, and lacks the technology necessary to keep pace with consistently changing regulations. Manually collecting, vetting and maintaining documents and records accurately is no easy task.

The eKYC process is completely digitized and eschews the use of physical documents entirely. Technologies that enable this protocol to function as effectively as it does include:

  • Biometric authentication: Facial or voice recognition and optical scanning technology are large parts of most eKYC processes to help verify customer identity.
  • Artificial intelligence (AI) and machine learning (ML): Machine learning models can identify unusual patterns or deviations from normal behavior, signaling potential fraudulent activities. AI can also be used to cross-reference customer information with various databases to identify discrepancies or potential risks associated with a particular identity.
  • Document recognition and optical character recognition (OCR): Digital uploads of official documentation such as passports and birth certificates can be done via a smartphone camera. Then, biometrics software can be used to check if the customer’s selfie matches their ID.
  • Two-factor and multi-factor authentication (2FA/MFA). 2FA uses one-time codes for biometric verification, device recognition and location-based authentication.
  • Digital breadcrumbs: These are characteristic identifiers that result from an individual’s online meta-information, including their IP address, browser settings, email address and typing speed, and can be used to verify identity.
  • Near-field communication (NFC). This technology provides a secure means of transferring data over short distances as well as accessing said data securely in databases or the cloud.

Some countries have adopted eKYC technology as a national standard, which is a testament to its effectiveness. The most prominent example by virtue of population would be India with the Aadhaar authentication system. Other countries that have standardized eKYC technology include:

  • The EU.
  • South Korea.
  • Estonia.
  • Saudi Arabia.

Australia, Canada and the U.K. are working on similar standardized frameworks for eKYC implementation.

Approximately 60 countries have some version of the eKYC framework in place, all with varying degrees of sophistication — but adoption is accelerating. eKYC is also growing more prevalent in the private sector and is starting to become a regulatory requirement for organizations that want to get ahead of the curve and/or have had problems with a more traditional KYC process.

In these sectors, fines for KYC or anti-money laundering (AML) compliance are steep. But, so too are the potential risks, such as massive fraud, that come with traditional, legacy KYC frameworks lacking the thoroughness required in a tech-ubiquitous world.

Major eKYC Use Cases

Banks, digital payment services and e-commerce platforms are some of the biggest adopters of eKYC today — for loan or credit applications, payment verification and age verification respectively, among other purposes.

According to the 2022 True Cost of Fraud Study by LexisNexis Risk Solutions, the expense associated with fraud has increased by 22.4% for financial services firms in the U.S. and Canada since the beginning of 2020. Notably, the study found that American banks bear the highest cost of fraud, with every $1 of loss translating to an actual cost of $4.36.

Other sectors that involve the frequent use of personally identifiable information have also used eKYC. If they’ve yet to develop and deploy a strategy, they may be referred to as probable or potential adopters. Some examples of large industries that fall under this category would be health care, telecom, and travel and hospitality.

In the foreseeable future, it’s certainly feasible to imagine eKYC being a ubiquitous tool among governments. For example, the U.S. DoD uses an eKYC framework in conjunction with its Common Access Card (CAC). It’s easy to envision a future in which the REAL ID is backed by similar fully digitized online authentication.

Benefits and Challenges of eKYC

In the simplest terms, eKYC functions as a digital ID for the consumer and a reliable assurance for the business requiring it. As alluded to earlier, organizations that want to drastically minimize the risk of fraud and noncompliance with AML/KYC regulatory requirements can do so with eKYC technologies.

Notable benefits of eKYC include:

Better Efficiency

Since eKYC removes the need for manual document verification, customer verification processes are completed much faster. As a result, customer onboarding occurs more quickly because organizations don’t need to wait until the proper personnel is in the office to process the documents.

Greater Accuracy

With an automated verification process in place, eKYC can reduce the risk of human error and ensure that identities are accurately verified. In turn, this can help mitigate instances of fraudulent account openings or identity theft, especially with the use of biometric verification during eKYC processes.

Cost Savings

Traditional KYC can be very time-intensive and tedious, which can result in a large resource drain for companies. With automated identity verification through eKYC, organizations can save on the operational costs associated with manual identity checks and document processing.


Perhaps most importantly, eKYC allows organizations to meet relevant AML and CTF regulations and avoid unnecessary fines and penalties. On top of that, it makes the entire process more efficient and cost-effective.

Enhanced Customer Experience

eKYC allows customers to complete the onboarding process at their own convenience, improving their experience. They don’t need to fax documents to the office, visit the location to speak with a representative or complete other in-person tasks that can extend the onboarding process beyond a reasonable bound.

Potential Challenges of eKYC

In certain circumstances or parts of the world, eKYC can be problematic. Potential exclusion of places with limited technological access, issues with cross-border compliance for multinational businesses, constantly evolving regulations and ethical concerns are just a few examples of obstacles in the way of more widespread adoption.

The last two are particularly important, as some jurisdictions have severely restricted the use of common eKYC technologies in various contexts — most notably facial recognition. This technology typically isn’t banned outright, but the regulations imposed on it are a clear sign of skepticism, which can extend to increasingly tech-literate consumers who may also show signs of concern.

Thankfully, research has disproved much of the skepticism that both businesses and customers have about facial recognition technology. Top algorithms in facial recognition are among the safest and most effective identification methods in biometric technology because they use mathematical patterns to store biometric data. Further, a study conducted in 2023 found that each of the top 150 facial recognition algorithms is 99% accurate across particular demographics, disproving the previous concern about racial or gender bias.

Still, companies considering using eKYC technology must take the time to understand how they work, investigate the potential for bias, remain cognizant of all applicable legal guidelines and, above all, consider various technologies and vendors before fully committing to and implementing an eKYC framework.

AuthenticID: Your Trusted Identity Solutions Provider

Using cutting-edge machine learning, biometrics and other technologies, AuthenticID is the verification partner you can trust for reliable authentication solutions. Traditional KYC pitfalls, such as human bias, are greatly reduced if not eliminated entirely via robust eKYC processes and strategies.

Our biometric solutions also include cutting-edge liveness detection to circumvent fraudsters’ use of deep fakes or other advanced fraud techniques. Taking advantage of robust and scalable eKYC solutions enables more seamless account enrollment and onboarding, and allows businesses to continuously monitor and re-authenticate documents quickly and as necessary. Together, eKYC helps you reduce losses from financial crime and avoid hefty KYC/AML fines.

Ready to learn more? Discover AuthenticID’s suite of identity-proofing solutions today.

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