KYC Screening: AI is now used in the majority of industries. But what does it mean for the banking sector? When it comes to KYC and AML, it seems AI is the way forward.
Criminals have always found a way to scam, steal and corrupt. Unfortunately, this didn’t stop with the development of modern tech. And today, as technology develops, so does the advancement of hackers. It doesn’t matter if we are using our phones, computers or tablets, hackers will find a way to break into files, no matter how encrypted, and steal precious data.
In fact, according to Hosting Tribunal, a hacker attacks every 39 seconds! And with 86400 seconds in a day, that’s a heck of a lot of potential hacks happening throughout the day. The same website also says that hackers create 300,000 pieces of new malware a day. Making it extremely hard for companies to protect themselves and their customers, from the dangers of cybercriminals.
A massive 27% of cyber-attacks in 2020 were on banks, according to FinTech news. This means the introduction of artificial intelligence (AI) has been nothing short of a miracle for the financial sector. AI is not only helpful for verifying customer information, but it also aids with anti-money laundering screening.
How? Through using Know Your Customer (KYC) identity verification techniques.
What Exactly is KYC?
In banking, KYC uses digital identity verification. It’s essentially a process of identifying a customer and using their unique details to open an account. These details are also used to access bank accounts too.
KYC is vital in moving forward with fintech as it’s key to successful and safe customer identification. Basically, it lets you know customers are who they say they are.
It also prevents money laundering and cybercriminals from being able to access accounts. Because if a client cannot provide minimum identification, they may have no access to their bank account. What’s more, is that KYC means that people are regularly screened for potential risks too.
But for identity verification to be really secure, it needs to go beyond simply typing in a passcode to access information. KYC screening needs to involve AI and biometrics to ensure a genuinely unique means of identification.
Where Does AI Come In?
As money laundering and cybercrime is on the rise, it’s essential banks do what they can to protect themselves against this. This is why anti-money laundering, otherwise known as AML, is a legal requirement for financial services. KYC is now a legally required practice for banks and fintech companies and without KYC, AML is not possible.
When performing KYC manually, as humans can’t compare tiny details, mistakes are often made. This isn’t helped as people struggle to keep up with the demand of high workloads. Unfortunately, human intelligence isn’t enough to protect firms and customers. And so, AI is now on the scene to create a stronger digital KYC method.
What this means is KYC uses documents such as ID cards, passport or proof of address for identity verification. It also uses facial recognition or eye scanning to authenticate the identity of an individual.
Biometrics relate to human characteristics and as fingerprints, faces and eyes are all unique they are a great way to ensure uniqueness. It takes the individuality of human code and mixes it with the intelligence of AI to create the perfect solution when it comes to identity verification.
AI streamlines the KYC compliance process by providing a simple yet faster solution to recurring KYC and customer due to diligence tasks. It goes without saying that with the rapid digitization of business operations, AI-powered KYC is the future of customer verification and KYC/AML compliance.
With the AI market expected to reach $100 billion by 2025, according to Good Work Labs, it’s no surprise that it is being used for so many aspects of modern banking. It makes it easy to see how using AI as part of KYC verification not only speeds up banking processes but saves money too.
In terms of identity verification, AI-Based KYC can happen in a matter of seconds. Letting you know who is genuine and who isn’t.
Are There Any Downsides
As with anything in robotics and banking, AI is not 100% perfect. At the end of the day, AI is still machinery, so this type of identity verification may lack some “human warmth”. But having customers queue up to have their passports checked by people to access information has never been the best solution, has it?
However, the great thing about KYC is that it combines both AI and human intelligence. So, businesses are getting the best of both worlds. Every single verification is cross-checked by KYC experts. This is all for added safety and confirmation.
And whilst AI will still make a mistake or two here and there, these are mere blips compared to the mistakes made by humans. It can be difficult for a person to tell the difference between one blond-haired, moustached customer and the next. Whist AI can tell the tiniest difference in the details of the human eye.
What’s more is that when it comes to identity verification, AI can identify high-risk clients, something that could take humans months of research. This also means that they can process high levels of information and detail. So AI can fix any issues sooner rather than later.
Surely, it’s worth sacrificing human warmth for safety, speed and security? And as tech keeps on developing, it probably won’t be long before we can tell the difference between humans and machines anyway.
Conclusion
When it comes to KYC, not only is AI helping reduce costs and speeding up processes, but it is also increasing the accuracy of identity verification. Reducing mistakes in the meantime. AI can use biometrics to perform online KYC, in-person identity verification and KYC through personal pieces of tech. All of this leads to the prevention of cybercrime, unwanted hack attacks and prevents money laundering, too.
Technology is developing more and more every day. The advancements of AI mean that all we have to do is ask a customer to look into a screen and the software can tell if it really is them or a stranger trying to access our money. Who knows what advancements will happen in this area in the next ten years? Only time can tell.
