Why the Indian consumer is wary of eKYC

When Aadhaar was being brainstormed, the founding team led by Nandan Nilekani imagined an electronic implantation of Know Your Customer (eKYC). Financial institutions are mandated to adopt KYC so that they are not misused for illicit activities such as money laundering and terror financing.

Last year, close to 63 billion eKYCs were done globally and the cost of acquiring a customer fell by 99% in many places. A physical KYC where someone visits a bank to authenticate their identity can cost anywhere between ₹250-400. But with eKYC, the cost reduces dramatically to ₹15-40. The potential to take it down lower exists. This is one reason why eKYC is a no-brainer and banks globally are at work to adopt it. But life, as always, isn’t that simple!

This comes through in a conversation with Varnika Goel, research director and co-founder at Twimbit, a Singapore-based technology advisory and research firm. “In India, the ability to complete eKYC with Aadhaar and PAN cards exists. But all customers don’t feel comfortable.” This, Goel explains is because most banks have outsourced this work to third party vendors. What they didn’t reckon for was that trust declines. In any case, that India is a “trust-deficit society” was a constant refrain that came through when in conversation with the architects of India Stack and Aadhaar. India Stack is a set of digital infrastructure services, built on top of Aadhaar, that enable secure and paperless transactions and services for Indian citizens. This includes eKYC.

Goel and her team at Twimbit are just done with authoring a report on what banks make the cut on eKYC world over. For all the ‘trust deficit’, of the top 10 banks across various parameters, five are taken by Indian banks. These include Bank of Baroda (BoB), HDFC Bank, Axis Bank and State Bank of India (SBI). To do that, Goel says they spent time with ‘users’ world over to understand their experience on eKYC with a bank.

By way of example, she says, in India, many people who log in are not digitally savvy and need hand holding. The easiest thing to do is to throw people at a problem to get eKYC done. So, there are correspondents at the other end of the video to authenticate people. But fact is that the more people they need to get this process done, the more it adds to the cost of running a branch. Add to this the discomfort with people from third parties and eKYC suddenly doesn’t sound viable to many. “They would much rather go to a bank’s branch and get it done physically,” Goel says.

According to Goel’s research BoB does it the best globally. On studying why, turns out the bank has automated most of the processes and kept a chat window handy if any intervention is required. Another issue customers face is long wait times. This is where SBI scores the most and BoB follows. When looked at, this is because both allow people to schedule ‘appointments’. This matters much in a country such as India because not everyone has access to highspeed internet. When scheduled and reminded, people carve time out to get it done. From a bank’s perspective, this is crucial because if wait times get too long, people may simply log off and the chances of losing customers go up exponentially.

What comes as a surprise is that BoB and SBI top the charts in the Top 10 as well. To Goel, however, this is unsurprising. “Most private banks are still under the impression that their success rates are high until you talk to them and show what these entities do. That’s an ‘Aha’ moment for them.”

What next? With Artificial Intelligence and Machine Learning (AI/ML) percolating all domains, she imagines a not-so-distant future where Banks eKYC gets done with people showing just their faces. Pattern recognition software will scour databases and confirm whether or not a person is who the person claims to be. Costs will go down even more. More people will get eliminated from their current jobs that lie across a video call. This sounds scary and impressive at once.