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How Financial Institutions can use PAN verification APIs for Remote Client Onboarding

by Sumanth Kumar on December 15, 2022

For FIs, onboarding is a significant new hurdle.

Banks still struggle to properly integrate clients even though the majority of financial institutions (FIs) have explicit digital-first initiatives to automate & optimise their backend operations. The majority of corporate clients need an easy-to-use onboarding process with little human involvement and foolproof verification, but due to strict compliance requirements and a high demand for customization, this is a challenging challenge.

According to polls, it takes an average bank more than 100 days to onboard a single corporate client, and the process is fraught with difficulties. Human error, mismanaged data, logistical difficulties, and high operational costs all significantly lower onboarding efficiency.

An urgent financial problem that requires a thorough solution.

The BFSI industry prefers speedy and safe KYC.

According to banks, account opening or KYC verification accounts for more than 40% of the onboarding process. Accelerated verification procedures are obviously necessary today for banks and NBFCs.

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Massive quantities of digitalization are required to speed up this process. Officially valid papers (OVDs) and the submission procedure must be digitalized, the verification process must be automated, and online management solutions for these documents & workflows are also required.

For each of these needs, digital KYC verification provides a comprehensive answer. Digital KYC verification is already being used by certain private banks and NBFCs to onboard individual clients remotely. Clients receive an email invitation, log into a KYC site, upload papers, have their faces and IDs verified, and are onboarded within minutes.

This technology must come in reliable and user-friendly packaging for banks that cater to business clients so that it may be integrated and scaled to meet demand.

API-accelerated digital onboarding

In order to conduct business in India, a PAN must be obtained, along with a PAN card. This functions as an identifying factor and a database of company data that can be utilised for verification and afterwards onboarding.

Financial institutions (FIs) with the appropriate technology in place can easily request PAN information from corporate clients, read out the information stored, and compare these details to information retrieved from the Income Tax Department (ITD) Database.

Due to the inherent security of digital verification, such a technique would make customer verification quicker, more cost-effective, and significantly safer.

Banks and NBFCs can adopt this expedited onboarding procedure thanks to online identity verification APIs.

PAN Verification APIs: How Do They Operate?

In India, the PAN (Permanent Account Number) card is a unique 10-digit alphanumeric identification number that is issued by the Income Tax Department of India to individuals, businesses, and organizations. It is a mandatory requirement for conducting financial transactions such as opening a bank account, receiving taxable income, and making investments above a certain threshold.

In the fintech industry, PAN cards are used as a primary KYC (Know your customer) document for verifying the identity of customers. This is important for fintech companies to ensure compliance with various regulations and prevent financial fraud. Additionally, PAN cards can also be used for electronically filing income tax returns and other financial transactions in the fintech industry.

PAN KYC or PAN Know Your Customer, is a process used by financial institutions in India to verify the identity of their customers using their Permanent Account Number (PAN) card. The PAN KYC process helps financial institutions to build a strong relationship with their customers by ensuring that they have accurate and up-to-date information about them.

PAN verification APIs enable banking apps or digital lending apps (DLAs) to communicate the client-provided PAN details to a KYC verification service provider for authentication.

FIs use these APIs to quickly verify customer KYC by extracting and reading out PAN details from photos using OCR and matching details utilising aggregate algorithms.

What are the steps involved in PAN Card Verification

Step 1: Make a request using API

To start the PAN verification process, the bank makes an API request. When the buyer agrees to the invitation for verification, this happens.

Step 2. Upload the PAN image

A picture of the front of the client’s PAN card is uploaded after the client logs into the onboarding site. Customer authentication information is entered first to facilitate safe verification.

Step 3: Data extraction with OCR

OCR technology is used to extract pertinent information and convert portions of the image into machine-readable text.

Step 4: Details are verified and matched

The extracted information is compared to that obtained from the ITD database. The client’s PAN number is used to access the latter. If the sum of these facts match, the client has been successfully confirmed.

The entire procedure takes 5 to 10 minutes, and the client can finish it at the convenience of their office or home. The FI’s involvement in this procedure is also very low; all that is needed at the very end to sign off on the onboarded client is a human touch.

The future is robust & lightweight KYC

Banks have found that the majority of workflows require constant fine-tuning and modification as they invest more of their budgets in designing seamless client journeys.

Due to these complications, banks have found themselves depending on manual procedures for onboarding, which lengthens the time it takes to generate income.

The solution to these customisation issues is APIs, which can be quickly integrated into any financial workflow to grow operations and produce tangible value for banks. As banks continue to strike a balance between efficiency and compliance, API-driven KYC will gain tremendous traction in the BFSI and see a rapid increase in adoption.

How IDcentral’s PAN verification API mitigates fraud & allows for regulatory KYC

IDcentral’s flexible Digital Onboarding Solution comes integrated with the latest AI technology for accurate PAN card verification, precise Liveness Detection, and speedy Identity Proofing. Enable Remote-Digital Onboarding capabilities with our API based solutions which have variable levels of Identity proofing procedures according to your customer base and compliance requirements like KYC or AML checks being integrated into the verification process.