Hi! Last December 28, 2017, my friend in college, Clara, offered me a chance to write as one of the freelance content writers at Qiscus, a local developer based in Indonesia and Singapore, which provides Chat SDK (Software Development Kit) and messaging API (Application Programming Interface), usually for business.

So, this time, I help Clara (and Ervina) to write an article about e-KYC or electronic Knowing Your Customer principle. This is a principle that is implemented by the banking industry (and fintech, that comes along with the development of technology), as required by Bank Indonesia to prevent the occurrence of banking risks). 

I have known this principle since I started to study for a test in PCPM Bank Indonesia 32, where I applied for the Public Relations position (read my story here) and when I opened a portfolio in mixed mutual funds by Danareksa Investment Management, also a stock account in BNI Sekuritas. So, yeah, I feel very happy to write about this topic because I am really into macro economy and finance topics lately.

The writing process itself is pretty simple and fast, although I need to recollect my memory about the banking system and search for the suitable reference to write about this topic. Earlier, Clara gave the wrong references to me, which is not discussing about the banking industry in Indonesia but in foreign countries (such as Thailand) that already imposed the e-KYC concept. 

Umm, what else? One thing that I regret is perhaps about the editing process that erase the more completed explanation over fintech and its various types. But well, maybe Ervina had to erase that since she herself didn't receive further information from Bank Indonesia about the audiences with related stakeholders to discuss about the plan to impose the e-KYC concept in fintech industry (particularly). Anyway, this article is published last April 27, 2018. 

Please kindly write my article about the enterprise's data security here (though I will also re-write the published section below). Enjoy!

***

Changing Trend in Financial Industry with eKYC

In Indonesia, the banking industry recognizes the various risks that might threaten any venture; such as operational risk, legal risk, the risk of the concentrated transaction and reputational risk. Therefore, the banking industry imposes the prudential principle by implementing the know your customer (KYC) principle, mainly before the prospective customer opens a bank account. The KYC principle is regulated by the Bank Indonesia Regulation No. 3/10/PBI/2001. The regulation was enhanced in 2009 by adopting Recommendation 40 + 9 FATF  (Financial Action Task Force) to prevent money laundering and/or the financing of terrorism.

The KYC principle forces the bank to recognize the customer’s identity and monitor any (suspicious) transaction. Moreover, the regulation also rules that even when the banking industry uses electronic media to provide its services, it still must meet all prospective customers in person, at least when they open an account. If necessary, the bank can conduct an interview with the prospective customer to confirm his/her identity.

The KYC Principle and The Implementation of e-KYC Concept

However, a face to face meeting as required by the relevant banking regulation is undoubtedly inefficient for today’s customers that just want faster banking processes. Provision of a face to face meeting can also be challenging to the banking industries infrastructure and connectivity resources.

Therefore, a digital KYC concept has been developed, in the form of e-KYC.This has been implemented by the Indian government and more relevantly, DBS Indonesia bank since January 2018. Although the framework of e-KYC is still under review, as mentioned by Wartaekonomi.co.id, DBS Indonesia has cooperated with 21 coffee shopsin Jakarta, Tangerang, Bandung, and Surabaya, to operate the e-KYC store.

The e-KYC concept is to utilize the growing trend among youth who likes to work from coffee shops by making it possible to open a bank account conveniently right there in the coffee shop. This is made possible by enabling the verification process, which is included in the KYC principle, to be done in approved coffee shops. For a coffee shop to be able to carry out the verification process it must be appointed as a DBS digibank agent, this is done through relevant chat apps. The coffee shop, acting as digibank agent, can then carry out the verification, using biometric technology.

Also read: Why You Should Consider Utilizing Chat to Engage Millenials?

How The Implementation of e-KYC Concept Benefits The Fintech Industry

Ultimately, the implementation of e-KYC concept would be a great benefit to the financial technology (fintech) industry. Bank Indonesia definesfinancial technology (fintech) as the application of technology in an economic system which generates a product, service, technology and/or new business model that can affect the monetary stability, the financial system stability and/or the efficiency, continuity, security, and reliability of the country’s payment system.

Currently, the fintech industry is growing exponentially in Indonesia, due to its ability to reach parts of society which cannot be reached by the banks because of the restrictive regulations. The Executive Director of the Public Policy of Indonesian Fintech Association (Aftech), Ajisatria Suleiman, said there are 205 active fintech companies in Indonesia. However, as stated by the Founding Partner of Financial Technology Australia, Simon Cant, the Indonesian fintech industry is facing two main problems: the unbanking society and the security of the data.

The first problem, dubbed the unbanking society, relates to the financial inclusion issue for individuals and small-medium business enterprises (SMBE). It is caused by the fact that people cannot access the fintech and banking services if they have no bank account, and many are prevented from opening bank accounts because they can not get into a bank for an identification interview or the banks have insufficient resources to provide enough representatives to enable the verification process as required by the KYC principle.

As the Deputy General Secretary of Aftech, Ari Awan, explains, the Indonesian government could encourage the banking society to implement the electronic identity card (e-KTP).  This can be optimised for use in the financial industry, as the essential data to implement the e-KYC concept. According to Awan’s study, in several countries, he found that some fintech companies are cooperating with a specific startup that works in the e-KYC field.

In light of that background, we can understand the importance of the e-KYC concept, both for banking and fintech industry. If the concept is well organized by the authorities, the stakeholder can move further to develop the implementation,  adding innovative features that can make the customer’s life easier.

Just some of the new ideas that can be developed, according to DBS Indonesia, are presenting a virtual assistant in the chat application to help the customer transfer money via the chat application only; adding a spending tracker to help the customer manage their money by accessing the financial planning and monitoring feature; and even presenting soft token facilities to pay bills, using the built-in security system, etc.

How Qiscus Can Help The Fintech Industry to Implement The e-KYC Concept

Once the e-KYC concept has been organized and the chat app system has been approved by the government, the fintech industry certainly needs a secure chat app to implement the e-KYC concept. However, building a chat app is not an easy task and using a public chat apps out of the question as it would not be able to provide a safe and secure communication service for bank customers.

Also read: Protect Your Data Privacy by Creating Your Own Communication Platform

This is why Qiscus offers help to the related parties who want to build a customized in-app through Qiscus Chat SDK products. Once the app is created, the parties can own the in-app chat even their own white-labeled app and add their customized features into it. Qiscus provides a chat SDK (Software Development Kit) or the developer kit that can be used to create a chat app, as well as a messaging API (Application Programming Interface) which can run the app as well.

Qiscus’ local architect team can also offer the support to add another feature that makes the real-time communication between the banking/fintech authority and the customer more convenient. One of them is chatbot service. When the bot is activated, the banking/fintech industry can save time because half the work in greeting the customer, asking their problem or even answering basic questions, has been done by the personalized bot. Kindly review Qiscus products here, or simply contact us at contact.us@qiscus.com to make your inquiries.