The importance of e-KYC remains largely underappreciated in most discussions on e-commerce technology where the focus is usually on more “big-ticket” technologies like blockchain, AI or IoT, an expert stated.
Despite its importance, very rarely do tech experts pointed out the impact of eKYC and digital identity in Malaysia’s banking and fintech ecosystem.
A recent study shows that there is a potential cost reduction of 90% in customer onboarding cost by enabling eKYC. The same study also indicated that digital identity could potentially enable 1.7 billion of the unbanked population to gain access to financial services.
Another separate study further breaks down the cost KYC, much of the cost is largely attributed to staffing costs, which supports that idea that digitising the KYC process could significantly reduce the cost of customer onboarding.
There have been some chunks of information, however, during the MyFintech Week earlier this year, BNM’s financial development and innovation department director mentioned that there are currently 11 banks trialling eKYC solutions.
As Malaysia’s population grows increasingly digital and eKYC technology becomes more affordable, government agencies, particularly the regulator, is being urged to release eKYC guidelines for the wider financial services sector.
Considering these factors alongside the fact Malaysia will be issuing virtual banking license soon, it is clear that eKYC regulation for the wider industry is inevitable and imperative.
It is important to note that Malaysia will not have to look far to find resources, there are already plenty of countries who have launched digital IDs and eKYC. It would be cost- and time-efficient to need to learn from them.
Meanwhile, the Vertical Director for Banking, Financial Services & Insurance of a leading Malaysian telecommunications company acknowledged that there are many benefits of Digital ID from a business perspective. For example, the tech will save time and money by reducing interactions to over-the-counter transactions, increasing productivity and enabling seamless and digitally-driven experiences for customers.
Experts believe that eKYC then becomes an important process for the banks to perform customer onboarding faster compared to traditional way of over the counter.
However, a key concern is managing digital ID fraud. Hence, the telecom’s eKYC solution is in compliant with Risk Management in Technology (RMiT) and Data Residency and Sovereignty requirements to assist the BFSI industry in the successful implementation of this initiative.
BNM’s eKYC tech
In August 2019, Bank Negara Malaysia issued an exposure draft which expanded its e-KYC guidelines for money changers in Malaysia.
The draft outlines proposed the minimum requirements and standards that a licensed money changer approved to implement e-KYC must observe in on-boarding customers.
The draft largely mirrors the earlier policy document but with some minor tweaks in requirements reflecting the nature of a money-changing business.
While the widening of e-KYC for the purposes of on-boarding customers is a move that is welcome by all, the industry eagerly awaits e-KYC’s applicability across the financial services industry.
It is anticipated that an industry-wide e-KYC guideline would be made available prior to the issuance of the virtual banking framework scheduled for the end of 2019.