Bank Negara Malaysia issued on Monday the much anticipated eKYC exposure draft for financial institutions in Malaysia, this draft when in effect, will be applicable across the industry to include banks, insurers, takaful operators, development financial institutions, and more.

This follows Bank Negara’s previous issuance of eKYC guidelines for both remittance companies and money changers.

Most of the readers of Fintech News Malaysia would likely be familiar with the term eKYC since it’s something we’ve covered and written quite extensively about.

For the benefit of those who may be unfamiliar, eKYC stands for “Electronic Know Your Customer” which is a set of verification that banks are required to carry out on customers for purposes of preventing financial crime that is done digitally.

Simply put, once this policy is in effect, you no longer need to show up at a bank branch to open an account.

The move to eventually introduce eKYC into a bank’s onboarding to process is one that we see would be much welcomed by banks. When in conversations with bankers, you would often hear them say that requiring the customers to show up at the branch for face to face KYC is one of the main stumbling blocks to having a truly digital experience.

The timeline of this exposure draft is not something that is a surprise to most in the industry, Fintech News Malaysia has also previously predicted that a draft for eKYC would be out prior to the virtual banking framework exposure draft which is scheduled to be released by December 2019.

The document indicates that Bank Negara Malaysia recognises the digitalisation of on-boarding processes as an important enabler to increase convenience and reach as well as lower the cost of financial services but was also wary of the fact that if not managed properly it could become a source of risk to a financial institution.

Among others, the document has set out a proposed FAR (False Acceptance Rate ) that does not exceed 5%. FAR refers to the instances of the system incorrectly verifying an individual.

If a financial product’s eKYC exceeds 5% for three consecutive months the entity is required to report to the regulator and subsequently propose additional controls to safeguard the effectiveness of the eKYC solution.

The full exposure draft can be found here, written feedback about the document should be submitted to Bank Negara Malaysia no later than 17 February 2020.