A service provider must be sure about the identity of its clients who buy mobile SIMs or open savings or demat accounts in banks. Other than fulfilling regulatory requirements, this process helps service providers cater to their customers well. Customer acquisition forms and accompanying proofs of identity are required for this purpose. But keeping all the documents physically — inescapable because of the existing regulatory environment — is a headache. What is the way out?
The Unique Identification Authority of India (UIDAI) has developed a service wherein, upon explicit authorisation by a resident through a biometric authentication, the authority releases an instant, electronic and digitally-signed proof of identity and address (including gender, date of birth and the resident’s photograph). This digital document can be retained in the database of a service provider in an electronic form. Customer acquisition forms can also be biometrically-authenticated or digitally-signed. The eKYC set of documents, thus created are robust, reliable, legally valid and, above all, paperless.
There are many advantages of eKYC over paper-based KYC. From a subscriber’s perspective, it means freedom from having to submit ID documents. The chances of identity thefts are eliminated as there is no paper trail. What is more, she is informed though SMS and email (if she has given that to the UIDAI) about the issuance of eKYC. The process cannot be completed without the active consent and participation of the customer. From the perspective of business, the procedure is reliable and robust because it eliminates the chances of forgery of ID documents. The use of resident authentication for authorisation, the affixing of a digital signature by a service provider and the affixing of a digital signature by the UIDAI, when the customer provides data, make the entire transaction non-repudiable. Digitally-signed electronic KYC data are machine readable; this makes it possible for a service provider to directly store it in their database for the purposes of service and audit without human intervention. This makes the process low- cost and error-free.
From a regulator/licensor’s standpoint, the process is easily auditable, non-mutable and instantaneous. The process also helps security agencies as chances of forgery are reduced and extracting information becomes very easy. In fact, some countries, notably Pakistan and Bangladesh, have conducted, what they call, biometric verification of mobile subscribers, to eliminate the chances of fake identities being used to acquire mobile SIMs.
The UIDAI’s eKYC service is free. As the process eliminates paper verification and movement and storage of KYC papers, it costs a fraction of the cost of paper-based processes. Since it is paperless, the process is environment-friendly too.
The UIDAI has made this service available since the last four years. Financial sector regulators were the first to adopt eKYC. A large percentage of Jan Dhan accounts were opened through the use of eKYC. The department of telecom had accepted Aadhaar as a valid document for the issuance of mobile SIMs in January 2011; but it took almost five years to prescribe a completely digital process for eKYC.
The new entrant in the telecom space, Reliance Jio, has garnered more than 50 million customers in a matter of few months by using eKYC. Other telecom service providers are also using this service to acquire customers. It is estimated that the use of eKYC in the telecom sector alone will result in saving 24 crore sheets of paper and prevent the cutting of 50,000 trees.
Digital eKYC needs to be replicated in as many sectors and situations as possible. When you check into a hotel, the receptionist takes a photocopy of your ID and keeps it. This information is shared with local security agencies. eKYC will ensure that the hotel is not required to keep the photocopy. The digital copy cannot be misused as it has a date/time stamp and the information can be shared with local security agencies in real time, digitally. There will be no impersonation and that will ensure prevention of crimes and improve security. Many private companies require the KYC of their franchisees/agents. Appointment of merchants by credit card companies is one such example. Such companies could use eKYC for onboarding small traders and merchants.
Another use of eKYC is the eSign. This is an online electronic signature service which can be integrated with the service delivery applications through an open API to facilitate an Aadhaar holder to digitally sign a document. Any person who has an Aadhaar number can digitally sign any document; no dongle or token is required for this purpose. There are many uses of eSign. It can be used in job applications, appointment letters, acceptance letters, form-16, pay-slips and invoices. eSigns facilitate legally valid signatures, respect privacy and most importantly, they are cost effective.
India is the only country, which has a billion-strong digital identity infrastructure which is unique and authenticable. It can be leveraged to provide digital ID authentication and eKYC services. This has also created a secondary set of innovations – eSign and digital lockers are just two of them. The more we use them, the more benefits will flow to our economy. We have, unfortunately, been slow in using these tools to make our processes paperless. Let us not delay their use.