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Decoding India's (e)KYC Processes

The primary aim of KYC guidelines is to ensure that no financial institutions, either intentionally or unintentionally, are being used to launder funds or finance terrorist activity. To establish the authenticity of an individual and ensure channels of financial transactions are not misused, In-Person Verification (IPV) was mandated as part of the KYC process.

In 2005, the Securities and Exchange Board of India (SEBI) mandated that all financial intermediaries and Asset Management Companies (AMCs) have to conform to the Know Your Customer (KYC) guidelines, implemented as part of the Prevention of Money Laundering Act (2002). While different Indian regulators prescribe different KYC norms, today we’re looking exclusively at SEBI’s KYC rules.
Traditionally, this process involved an employee visiting the client and verifying their identity documents. The employee would then stamp the documents as Original Seen and Verified (OSV), and the KYC process would be completed.

The Challenge

With the proliferation of new-age fintech firms, financial services companies, and lending platforms over the last few years, complying with the paper-based KYC regulations has caused massive slowdowns in the entire industry:
  • High operational expenditures and overheads for businesses
The largest brokers in India open more than 15,000 accounts/day. If we consider the paper-based KYC process, imagine the amount of time (and money) required for employees to physically verify each of these 15,000 individuals and their documents.
  • Increased inconvenience for their customers
According to a World Bank report on identification systems; “The more arduous the verification process, the more likely customers are to abandon the transaction, either in favor of a more user-friendly experience, or by foregoing the service entirely.”
In addition to being inconvenient, In-Person Verification (IPV) is also unnecessarily intrusive. The possibility of customer attrition due to these factors poses a major business risk, especially for smaller firms providing financial services.

The Fix

→ The Problem: Expensive + Time-consuming + Intrusive KYC Processes

→ The Solution: Economical + Quick + Secure KYC Processes
With the government’s focus on digitalizing the economy, and increasing its value from $200 billion today to $1 trillion in 2025, businesses must adopt technology to increase their efficiency.
What better way for the BFSI sector to increase their efficiency than by simplifying costly, cumbersome KYC processes? Although digital alternatives have been around for a while, adoption has been slow, due to the ambiguity surrounding KYC regulations.
For SEBI-regulated entities, the documents required to complete the KYC process are:
  • Individual’s PAN
  • Proof of Identity (requires the individual’s photograph, name, DoB)
  • Proof of Address (requires the individual’s address)
  • Bank Account Details
Also, the individual must be verified to confirm that they are indeed the person opening the account (In-Person Verification/IPV).

Here’s how Digio can help you transform your KYC processes:

DigiLocker Integration: DigiLocker documents are fetched directly from, and digitally signed by, the issuing authority. These electronic, or e-documents, are considered equivalent to their physical counterparts (as per Rule 9A of the Information Technology Act — Preservation and Retention of Information by Intermediaries Providing Digital Locker facilities 2016 — as notified on 8th February 2017) and eliminate the need for a customer to produce physical copies of their identity documents.

  • Using DigiLockera customer can directly share an authenticated digital version of their PAN card for KYC. Not only does this save time and paper, but it also aids in preventing the possibility of identity theft and fraud, since there is no need to submit physical copies of identity documents.
  • DigiKYC is integrated with DigiLocker and makes it simple for clients to provide their PAN through DigiLocker.
  • Even if a client doesn’t have a DigiLocker account, it can be created in real-time during the process. The process is very straight-forward and does not require a client to upload their IDs. To fetch issued documents with DigiLocker, an individual simply needs to enter their Aadhaar number and authenticate their identity through an OTP sent to their Aadhaar-registered mobile number.

PAN Card Parsing: An individual’s PAN card details can also be parsed using Optical Character Recognition (OCR) and verified against the NSDL database.
  • DigiKYC uses best-in-class OCR technology to accurately extract PAN card details and verify them programmatically against the NSDL PAN verification service, or against a live photo/video taken by the client.

II. Proof of Identity (PoI) & Proof of Address (PoA)

  • Proof of Identity: Individual’s photograph + Name + DoB
— PAN | Aadhaar | Passport | Election Commission ID | Arms License
  • Proof of Address: Name + DoB + Address (photograph not necessary)
— Aadhaar | Drivers License | Passport | Election Commission ID | Arms License
DigiLocker Integration: At the moment, DigiLocker can only provide authenticated copies of an individual’s Aadhaar (masked), and their Driving License. These documents serve adequately as PoI and PoA since they contain the individual’s photograph, name, DoB, and address.
  • DigiKYC, as mentioned earlier, is integrated with DigiLocker, and clients can easily share the authenticated digital copies of their Aadhaar (masked), and Drivers License.

III. Bank Account Details

Penny Drop (IMPS): To validate the bank account that an individual has provided, a small transfer (usually Re. 1) can be initiated. This transaction will provide details on the name of the account holder, bank, and IFSC code.
  • DigiKYC allows you to seamlessly integrate the Penny Drop feature into your onboarding process and validate bank account details provided by a client.

 IV. In-Person Verification (IPV)
Video KYC: Video KYC has already been adopted by several brokers, AMCs, and fintech lending firms to simplify their customer onboarding processes. The process is customer-initiated and usually involves taking a video of the customer either displaying (or speaking) an OTP that is sent to them when the process is initiated. This ensures the liveness of the individual.
  • DigiKYC has provisions for Video KYC and matches the face in the video against the photograph in the PoI to confirm the identity of the individual.

In addition to DigiLocker Integration, Video IPV and Penny Drop, DigiKYC has the following provisions:
  • ID Card Parsing & AnalysisThe authenticity and identity of a customer or client can be verified by matching their ID card details (such as PAN, Voter’s ID, Driving License) with a selfie or video taken by the client. ID card data can also be extracted and stored for record-keeping.

  • Aadhaar Offline XML KYC: Since the use of Aadhaar eKYC by private companies was banned by the Supreme Court in 2018, an alternative method of Aadhaar verification has been made available by UIDAI. This process is free to use for all private entities and ensures that the personal data of the Aadhaar-holder is safe, secure, and encrypted. It is voluntary and initiated by the Aadhaar-holder. This method eliminates privacy concerns as the UIDAI database is not directly accessed by private third-party firms.

Using these digital alternatives, the KYC process can be completed at drastically lower costs and in minutes, as compared to paper-based KYC. In addition, it's much more convenient for your customers.

For more information, or to request a demo, feel free to reach out to us at