What Is eKYC, & How Does It Work for Verifying Online Accounts in Malaysia?
In the digital age, where everything from shopping to banking has shifted online, the world has become a global village.
But as we revel in the ease and convenience the digital world offers, the question of security and identity verification becomes increasingly significant.
Imagine stepping into a world where verifying your identity online is as seamless as breathing, where you can transact securely without the fear of misusing your data.
Welcome to the world of Electronic Know Your Customer (eKYC), a digital verification tool that’s rapidly gaining traction in Malaysia.
But wait, you might ask, what exactly is eKYC, and how does it work?
The concept of eKYC might sound complex, but peel away the jargon, and you’ll find a simple, efficient, and secure system designed to protect both businesses and customers.
Intrigued? Let’s unravel this digital marvel together.
Technical Aspects of eKYC
eKYC Technology Stack
The technology stack5 involved can be quite comprehensive.
It includes facial recognition software, optical character recognition (OCR), and machine learning algorithms. These technologies work hand in hand to capture and verify the identity details of a user.
OCR extracts data from the identification documents, while facial recognition software verifies the information against the individual’s real-time image or video.
Moreover, artificial intelligence and machine learning are crucial in the eKYC process. They aid in recognising patterns and anomalies that humans might not be able to detect, ensuring a more accurate and reliable verification process.
Compliance with Regulations
In Malaysia, eKYC is not just about integrating technology; it’s also about adhering to the regulations set by the authorities.
The Bank Negara Malaysia (BNM) has set stringent eKYC implementation guidelines. These include the need for explicit customer consent, secure storage of customer data, and mandatory reporting of suspicious transactions.
Compliance with these regulations is crucial for businesses, as non-adherence can lead to hefty fines and a tarnished reputation.
Data Security and Privacy
Businesses in Malaysia need to prioritise data encryption and secure storage to protect their customers’ data from potential breaches.
The eKYC process should be designed to collect only the necessary information, and the data must be stored securely to prevent unauthorised access.
Regular audits and updates should be performed to ensure the highest level of data security.
Customer Convenience
Lastly, the traditional KYC process can be lengthy and tiring, requiring customers to present their documents for physical verification.
The eKYC process simplifies this by enabling remote identity verification, saving customers time and effort.
By integrating eKYC into their systems, businesses can offer customers a seamless onboarding experience.
eKYC Process in Malaysia
1: Collection of Personal Information
The eKYC process in Malaysia begins with collecting the individual’s personal information.
This includes full name, date of birth, nationality, and identification number. The individual is usually required to fill out an online form to provide this information.
2: Identity Verification
Once the personal information is collected, the identity of the individual needs to be verified.
This is typically done through a live photo or video, where the individual is asked to present their national ID card or passport.
The data from the document is then matched with the personal information provided.
3: Document Verification
In this stage, the document provided for identity verification is further checked for authenticity.
This is done through various means, such as hologram, font, and security feature checks. The document is scanned using advanced technologies to ensure its validity.
4: Facial Recognition
Facial recognition technology matches the individual’s live photo or video with the picture on the document provided.
This ensures that the person providing the information is the same as the person on the document.
5: Risk Assessment
After verifying the individual’s identity, a risk assessment is carried out.
This involves checking the individual’s details against various databases, such as those of politically exposed persons (PEPs), sanctions, and adverse media.
This is to ensure that the individual is not involved in illegal activities.
6: Completion of KYC Process
If all the checks are successful, the eKYC process is considered complete. The individual can then access financial or other services that require KYC.
The process is quick, secure, and efficient, providing a seamless user experience.
How Can Businesses Implement eKYC in Malaysia?
Step 1: Understanding How eKYC Works
In Malaysia, the central bank, Bank Negara Malaysia (BNM), regulates eKYC.
Therefore, the first step for businesses is to familiarise themselves with BNM’s eKYC guidelines6, which can be obtained right here.
Step 2: Choosing a Reliable eKYC Provider
Next, businesses need to choose an eKYC provider that is compliant with BNM’s guidelines.
The provider should also have a solid track record for security and reliability.
Step 3: Integrating eKYC into Your System
Once a provider has been chosen, businesses can integrate the eKYC solution into their system.
This usually involves developing an API interface between the company’s system and the eKYC solution.
Step 4: Training Your Team
After integrating the eKYC solution, businesses need to train their team on how to use it.
This includes training on how to handle sensitive customer data securely and responsibly.
Step 5: Running a Pilot Test
Before rolling out the solution to customers, businesses should run a pilot test to ensure that the system works smoothly and that all potential issues are addressed.
Step 6: Rolling Out to Customers
After the pilot test, businesses can roll out the eKYC solution to their customers.
This should be done to minimise disruption to customers and maximise their convenience.
Step 7: Regular Monitoring and Updating
Finally, businesses should regularly monitor and update the system as necessary to ensure it remains secure, reliable, and compliant with regulations.
Regular feedback from customers and employees can also provide valuable insights for improvement.
Overall,
eKYC is an essential tool in Malaysia’s digital landscape. It not only streamlines customer verification but also bolsters online security. The technicalities may seem complex, but the process is designed for efficiency and safety.
Governed by strict regulations, eKYC’s future in Malaysia looks promising. As the digital world evolves, so will eKYC, adapting to provide more robust and reliable identity validation.
Our solutions at Grayscale enable businesses to implement eKYC processes seamlessly. Our advanced technology and compliance expertise ensure that companies can verify customer identities accurately and efficiently.
We believe that secure and efficient customer verification is crucial for businesses to build trust and provide a seamless digital experience.
Email us at enquiries@grayscale.my to learn more about how our cybersecurity solutions can benefit your business in Malaysia.
References
1 Bank Negara Malaysia. (2023, February 23). null Exposure Draft on Electronic Know-Your-Customer (e-KYC). Bank Negara Malaysia. Retrieved January 24, 2024, from https://www.bnm.gov.my/-/ed-ekyc-2023
2 McKinsey. (2019, January 2). DIGITAL IDENTIFICATION: A KEY TO INCLUSIVE GROWTH. McKinsey. Retrieved January 24, 2024, from https://www.mckinsey.com/~/media/mckinsey/featured%20insights/innovation/the%20value%20of%20digital%20id%20for%20the%20global%20economy%20and%20society/mgi-digital-identification-a-key-to-inclusive-growth.ashx
3 New Straits Times. (2017, September 4). BNM to finalise standards for e-KYC. New Straits Times. Retrieved January 24, 2024, from https://www.nst.com.my/business/2017/09/276402/bnm-finalise-standards-e-kyc
4 Cheong, A., & Tan, J. (2020, July 1). BNM Issues Policy Document On e-KYC, Takes Effect Immediately. RinggitPlus. Retrieved January 24, 2024, from https://ringgitplus.com/en/blog/personal-finance-news/bnm-issues-policy-document-on-e-kyc-takes-effect-immediately.html
5 Moore, M. (2023, August 24). Banking App Development: Best Tech Stack that You Should Consider. Medium. Retrieved January 24, 2024, from https://medium.com/@KMSSolutions/banking-app-development-best-tech-stack-that-you-should-consider-856f27ee8b59
6 Bank Negara Malaysia. (2020, June 30). Electronic Know-Your-Customer (e-KYC). Bank Negara Malaysia. Retrieved January 24, 2024, from https://www.bnm.gov.my/documents/20124/948107/e-KYC+Policy+Document+300620.pdf/af752210-02e5-d2a4-e2ee-04b00c731a91?t=1594085248675
