Video KYC – A Foolproof Formula For Social Distancing

The latest measure of social distancing could be worrisome and may have restricted our routine financial activities. No worries, here is some good news! The Reserve Bank of India (RBI) has taken a great initiative to retire the traditional paper-based KYC method for customer identification and digitalize the KYC process for the lending and non-lending ecosystem.

Yes, that’s right! The wait is over. RBI has mandated all the banks, lending startups and non-banking financial institutions to identity cyber frauds and money laundering by authorizing remote customer on-boarding through a video call. This is also also known as Video KYC, Digital KYC, or Video-based Customer Identification Process (V-CIP). Though it’s primarily devised with the lending ecosystem in mind, we believe the application is going to have uses cases across industries.

Now, the customers can update or complete their KYC process and continue to use the lending service. Considering the current pandemic scenario going digital is the only way of life.

Let’s understand more about this new way of life and why it necessary to adapt it.

Difference between eKYC and Video KYC?

Let’s first understand what is KYC?

Know Your Customer (KYC) commonly means identity verification, which essentially refers to who you are and how can you prove it. This process involves submitting the KYC form along with the document verification photocopies to record your authenticity and to avoid the misuse of your identity.

The Electronic Know Your Customer (eKYC) is an upgraded version of KYC, which permits you to complete the KYC with document verification electronically such as Aadhar or PAN. Completing KYC or eKYC has not only become an indispensable prerequisite for banking activities but also e-commerce and e-wallet activities such as Amazon, Flipkart, Paytm, Ola, Uber and GooglePay. Conversely, Video KYC is the breakthrough and evolution of eKYC, which enables not only the electronic document verification but also provides the capability of live video calls with customer consent. Through a video call, you can directly chat with a Banker or Regulated Entity (RE), show the documents for verification and complete the process within three minutes. It’s simply an anytime, anywhere service!

What is the limitation of KYC or eKYC? 

The existing KYC method goes beyond paperwork that needs to be checked, verified, filed, rechecked, refiled periodically, and ultimately practice security & audit compliance standards. It is tedious and laborious paperwork for REs and takes approximately 24 days to complete the process! Lastly, the paperwork-related costs are major barriers to financial inclusion.

Even with Aadhar-based eKYC implementation, there are several limitations like investment limits for mutual funds. The customers still need to complete the traditional KYC process in such scenarios. In due course, the Supreme Court prohibited Aadhaar-based eKYC for banking sectors and authorized the use of Aadhar offline verification. However, the private sector potentially can continue to utilize eKYC service.  It is a temporary setback as costs and time of enrolment will likely go up.

For completing the KYC process, customers need to get time off their busy schedules, take the photocopies or electronic documents, confirm that the Banker or RE is available, and physically visit the banks waiting in long queues. The 100% KYC record in many lending and non-lending institutions has invariably been affected by this tedious process.  This created an urgent necessity for RBI to implement digital KYC or Video KYC as the latest norm.

 Why Video KYC and how does it benefit?

The video KYC solution is an amalgamation of human and artificial intelligence (AI). That means only a trained Bank Official or RE is eligible and authorized to conduct the vKYC with customer consent. Furthermore, RBI guidelines have taken all precautionary measures from a security and governance standpoint. Here are the mandatory guidelines RBI has laid out for the Video KYC process.

Furthermore, RBI guidelines have taken all precautionary measures from a security and governance standpoint. Here are the mandatory guidelines RBI has laid out for the Video KYC process. 

RBI Mandatory Compliance Solution Features Required in vKYC Solution
End-to-End Encryption
Hosted on Bank’s Domain
Informed Customer Consent
Real-time Two-way Recording
Capture Live Location
Capture Photo
Capture clear PAN Card image
Compare Face using AI
Liveliness Check
Bank Official Module
Customer Module
Video Storage for concurrent and Security Audit
On-premise Deployment

This digital transformation will radically improve the key performance indicators (KPIs) of lending businesses and potentially increases the ROI. It can lead to:

  • 3x increase in customer retention rate and sales
  • 80% reduction in turnaround time
  • 70% reduction in operational and paper-related expenditure
  • 30% increase in official’s productivity and performance

In a nutshell, the vKYC implementation will empower businesses to scale faster, reduce costs and cut turnaround time. And their customers can quickly complete KYC in the comfort of their homes with an internet-enabled laptop and their government documents. This not only saves document printing costs but also follows social distancing norms.

Once the bank account is KYC compliant then all the other services can be used effortlessly such as opening Fixed Deposits (FD), Recurring Deposits (RD), Public Provident fund account (PPF), Mutual Fund Investments or any services which involve a financial transaction. Furthermore, according to a report by McKinsey, implementing digital KYC solutions possibly increases the GDP from 3% to 13%. Hence, Video KYC is a much-needed solution in the aftermath of Covid-19.

Customer onboarding is critical for the lending and non-lending ecosystem! So, what are you waiting for?  

Are there ready solutions available for Video KYC?

Yes! There are a few solutions available in the market for video KYC. One such solution is developed by GS Lab called vKYC. The solution is RBI regulatory-compliant and accelerates customer onboarding and verification for businesses. Both lending and non-lending institutes can configure and integrate video calls directly into applications and workflow, without building any backend infrastructure. Our AI-driven platform and algorithm facilitates geo-tagging, customer face authentication, customer liveness check, and customer government documents collection in real-time through secured video.

The solution is mainly built on three technologies: 

  • GeoLocation – To trace the customer’s location
  • Artificial intelligence and OCR – To facilitate facial recognition and document verification.
  • Cloud Storage & Services – To provide an encrypted connection, centralized, and secured storage for the recorded video KYC.

Ultimately, a simple, easy, and agile vKYC solution is available as per the customer’s desired date and time. And the business can speed up customer onboarding remotely. From initiating the video KYC call to complete approval, it just takes five steps:

  1. Getting Customer Consent
  2. Checking Customer Location
  3. Checking Liveliness
  4. Capturing And Validating Identity Proof
  5. Capturing And Matching Customer Face

This certainly is a foolproof formula for social distancing!

Author
Suchitra Shettigar | Lead Technical Writer

Suchitra Shettigar is a Lead Technical Writer at GS Lab and has expertise in drafting technical documentation for various software products across financial, communication, and security domain. She is keen on leveraging new tools and technologies. She has working knowledge of Structured Technical Writing (DITA), Topic-based writing, API Writing and Testing, Minimalism and Information Mapping principles, and Usability Testing for fintech and security products.