As the fintech segment is getting more and more digitised, the adoption rate of eKYC is high and imperative. New age fintechs with their innovations and technically advanced products have ensured financial inclusion to every corner of the country. Need to maintain legal practices in the system and ensure a strict compliance and regulations check. It is important for fintechs to implement an effective process of preventing Know Your Customer (KYC) led data breach.
The customer data including confidential financial and personal information is open to financial frauds and identity thefts and threats before the organisation realises the issue.
According to a report by Swedish VPN services company Surfshark, 4.7 million email accounts were breached in India in 2022. The country witnessed a drastic reduction in the number of cyber breaches last year in 2022, dropping from third to seventh position amongst most cyber attacked countries. Report by Surfshark also states that 18 out of every 100 Indians are affected by data breaches.
These data breaches harm companies and our economy along with affecting consumer confidence in the ecosystem leads to users ignoring taking up the product or service. Thus making it imperative for fintechs to adopt online KYC measures that reduce data breaches to an extent.
Solutions to Prevent Data Breaches
Implement effective security measures
Adoption of security measures in the online KYC system is frictionless. Still banks and fintechs must implement multiple layers of security measures to strengthen their systems and prevent them from cybercrimes and other unscrupulous activities.
Biometric verification for smartphones
Extra convenience provided by smartphones leads to financial transactions being performed by a simple click on a mobile application. It is easy for potential hackers to break into a weak application or mobile service provider. Although the latest smart phones have features like biometric scanners and facial recognition sensors. These can be used by financial institutions to implement cyber security measures to protect the data from any cybersecurity attacks.
RegTech and SupTech to maintain compliance
Regulatory and supervisory technologies help fintechs maintain compliance with regulatory policies relating to data protection. This ensures management is on top of all data protection measures at all times and the error occurrence will be the least.
The technology helps identify potential risks and threats and reports them on time before anything happens. It is also cost effective to implement and monitor data exchange on all data streams of the institutions.
Contribution of technology to data security and the way forward
The issue of data theft, especially data received through eKYC is a primary issue in the Indian financial ecosystem. While security measures and regulations like the Data Protection Bill were proposed – none proved to be 100% effective in protecting the layer.
Through Regtech, information provided by fraudsters can be cross verified against existing data to check the dissimilarity in the documents. This helps in preventing identity theft and monetary fraud. It also monitors an applicant’s financial activities in the past.
The system also provides features like multi factor authentication and encryption tools for data to be stored on cloud servers or other platforms.
A secure online KYC data protection system is vital for any financial institution's growth. It saves the institution from potential litigation that can overuse resources like manpower and time. Today most of the financial businesses have moved online. This makes the digital customer onboarding process and the need to implement a system that guarantees 100% security against any fraudulent activities non negotiable.
KYC and Data Breach
Despite the importance of KYC in cybersecurity being clear, data breaches are still a real threat. Recent instances of data breaches reveal the same. The incident happened back in 2021 when CDSL's KYC arm exposed 4.39 cr investors data twice within 10 days as reported by Economic Times.
To protect the data from cyber fraud and other similar criminal attacks, it is important to implement effective KYC procedures and invest in encryption and cybersecurity tools and systems.
KYC and Cybersecurity
Know Your Customer (KYC) has become a vital part of any fintech business’ security strategy, as it helps to get rid of fraudsters and protect customer data. Consumers are the primary focus in any cybersecurity strategy and businesses must take initiatives to help them protect information online.
KYC Best Practices
There are many KYC best practices that fintechs can implement to protect themselves from cyberattacks, a few are:
- Multi-factor authentication (MFA)
- Conducting regular background checks on customers
- Updated security measures and password policies
- Educating on cybersecurity risks and consequences
- Restricting access to sensitive data and a backup solution
- Encrypting customer data
KYC and ALM - Difference and best practices for 2023 by Samsub
Gaining Trust of All Stakeholders
According to research, 88% of the customers say that their trust in any business is based on how they handle their data and security.
Experts believe that cybersecurity is for gaining the trust of customers and all other stakeholders. Through implementing strong KYC policies and practices institutions can protect their customers from the growing threat of cyber fraud and data breaches.
Experts believe that authentication and verification is a routine part of any acquisition due to an increase in cybercrime. Customers, partners and shareholders need assurance that the organisation can protect its confidential data.
Pairing Cybersecurity With Regulatory Requirements
PwC’s report on cybersecurity regulations clearly states that businesses must pair their cybersecurity efforts with regulatory requirements to be fully compliant.
Service providers must protect the value of customer data as well as customer privacy rights using risk-based cybersecurity practices as a matter of due diligence. KYC requirements are aligned with the laws and business requirements.
Organizations should consider conducting security audits frequently to identify possible vulnerabilities. These audits can help organizations to improve their cybersecurity terms and make the necessary changes to mitigate risk.
Conclusion
As bottomline data breaches continue to distract businesses, it is more important for organizations to implement effective KYC procedures and invest in efficient cybersecurity software tools and systems. By following the best practices, businesses can help protect their customers' sensitive information and gain the trust of all stakeholders.
Learn more at Digitap.AI
Becoming an effective solution Digital.ai is providing one of the best KYC solutions as part of the onboarding suite for the banks and financial institutions. Leading KYC solution provides aadhaar based and video KYC to build better trust in the end customer and not to quit in the middle of the process.
Digitap empowers banks, NBFCs and financial institutions to assist clients in providing a better customer experience through digital KYC and assurance of data protection.
To learn more about Digitap’s Digital KYC solution Click here
You can also Book a Demo or write to us at sales@digitap.ai to get started.
