Video-based KYC (Know Your Customer) is set to replace the physical verification process. The prospect is still in a nascent stage and is under regulators’ purview, but it is said to be a cost-effective method to reduce the administrative cost of companies. This step was initiated after the Reserve Bank of India (RBI) issued guidelines on KYC, restricting the use of eKYC by the private entities. As a result, these entities tied-up with the retailers or other companies to complete the KYC of the customers in-person.
A video KYC would enable a representative of a bank or any other financial institute to verify the identification of the customer by confirming the details of the documents submitted via video calls. Video KYC would be carried out through Google Duo for android users and Facetime for iOS users. During the call, a customer would need to show their original documents – proof of address and identity – to the company’s representative, after verifying his credentials. The footage would then be uploaded for final verification by the company’s team. Significant financial and mobile wallet companies have started setting up the infrastructure for this new KYC system.
The benefits of using this technology are as follows:
- It reduces paperwork. It would also help eliminate the inefficiency of human errors.
- It is cost-effective. It reduces the loss of revenue due to delays in the process that starts from the time of customer application till verification.
- It saves a lot of time as it can be done anytime and anywhere. The physical presence of the customer is not mandatory. He/she needs to have access to a device with a camera and a good internet connection.
- It minimized the risk identity frauds and submission of fake documents. All the information related to the customer can be stored securely with an online secure digital system.
- It would also enable companies to use the same KYC for different products, such as opening saving accounts and loan applications.
There are some drawbacks to this technology too. The financial institutes will have to draw a strategy to combine video KYC with physical verifications to reach the population. They will also need to ensure that the video KYC remains compliant with the Data Protection Law that will be released by the Parliament.
The Reserve Bank of India (RBI) is still exploring the vulnerabilities associated with this Artificial Intelligence-based process. When the Supreme Court put an end to the use of Aadhar-based eKYC, it was a big blow for the financial services sector. Our government understands the transformative power of technology, and hence, the Reserve Bank of India (RBI) is making ongoing efforts to figure out a solution with continuous communication with the Indian Bank Association (IBA) representatives.
According to Buckminster Fuller, “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete. “
Technological progress has made us advance toward a visionary India. A country where every sector is growing economically, there is a need to find solutions for dealing with sensitive information and data related to consumers and businesses. Video-based KYC is the most secure and efficient form of verification which would not involve any human interaction. It would be purely technology-driven and would help the fintech companies to reduce their cost and increase their efficiency.