With digitization becoming the new normal & commoditized, customer experience has emerged as a critical differentiator for businesses, including Indian Non-Banking Financial Companies (NBFCs).
For NBFCs, enhancing customer experience involves not just delivering a seamless service but also ensuring a secure environment that’s compliant with regulatory requirements. One such critical process that sits at the intersection of customer experience and regulatory requirements is Know Your Customer (KYC) verification.
Traditionally, KYC has been a manual, time-consuming process riddled with challenges. However, the growing adoption of Artificial Intelligence (AI) is transforming this space, unlocking efficiency with scalability.
Traditional KYC Process: Challenges and Pain Points
The conventional KYC process in NBFCs involves several stages, each fraught with its own set of challenges:
- Document Collection and Verification: Customers must submit various documents, such as identity proof, address proof, and financial statements. These documents must be collected, verified for authenticity, and validated against the information provided. The sheer variety of documents, including Aadhaar cards, PAN cards, utility bills, and bank statements, often requires extensive manual effort, increasing turnaround time and the risk of errors.
- Data Entry and Management: Once verified, the information from these documents is manually entered into the system, a process prone to human error and time-consuming, leading to potential compliance risks.
- Background Checks: This involves cross-referencing the customer’s information with various databases, such as credit bureaus and sanction lists, often a fragmented process that further delays the overall KYC timeline.
- Approval and Onboarding: After all verifications are complete, the final approval is granted, and the customer is onboarded. This multi-step process can take several days or even weeks, negatively impacting the customer experience.
According to McKinsey, financial institutions spend around $60 million annually on KYC compliance. Moreover, delays in KYC processing can lead to customer dissatisfaction, impacting overall business growth.
Leveraging Document AI to Enhance KYC Efficiency
One robust yet underutilized solution for streamlining customer KYC in Indian NBFCs is Document AI. Traditional Optical Character Recognition (OCR) solutions are common but often fall short in handling the diverse document types encountered during customer onboarding.
These rule-based OCR systems can extract data from standard forms but fail with non-standard documents and unstructured data.
Document AI, however, is trained on millions of annotated data points, enabling it to recognize and auto-classify uploaded documents, extract data from non-standard pages, validate the extracted data against sources like credit bureaus or tax portals, and automatically input data into the Loan Origination System (LOS).
This capability transforms the KYC process in several ways:
- Automated Document Verification: Document AI systems can quickly and accurately extract information from various documents, reducing the verification time from days to minutes and minimizing human errors. For example, AI can verify Aadhaar cards by cross-checking the data with the UIDAI database in real-time.
- Handling Complex Document Types: AI systems can manage complex documents such as balance sheets and profit & loss statements, extracting critical financial data and verifying it against multiple sources, thus reducing the risk of fraud and errors.
- Enhanced Data Accuracy: Machine learning algorithms can cross-check extracted data against multiple databases in real-time, ensuring higher accuracy and compliance. This automated verification process reduces fraud risk and enhances the reliability of customer information.
According to a survey by PwC, 30% of financial institutions are already using AI for KYC and anti-money laundering (AML) processes, with another 25% planning to implement these technologies within the next two years. These statistics underscore the growing adoption and effectiveness of Document AI in transforming KYC processes while delivering a superior customer experience.
At Vaultedge, we offer advanced Document AI solutions that streamline these processes, enabling NBFCs to focus on what truly matters: their customers. Our technology ensures compliance and efficiency, making customer onboarding a seamless experience.
Conclusion
In today’s macroeconomic environment, where customer experience is paramount, leveraging AI/ML for KYC processes offers NBFCs in India a significant competitive advantage. By automating document verification, enhancing data accuracy, performing real-time background checks, and streamlining customer onboarding, these technologies address the pain points of traditional KYC processes, ensuring faster, more accurate, and compliant customer verification.
At Vaultedge, we are committed to driving innovation in the financial sector. Our Document AI and digital lending APIs are designed to help NBFCs navigate the complexities of customer verification with ease and efficiency. To learn more about how we work with top banks and NBFCs to automate their customer onboarding journeys, feel free to get in touch or visit our website.
As we continue to explore the potential of Document AI, we remain focused on enhancing customer experience and enabling our clients to achieve greater success.