Video KYC: What it is and how it streamlines customer verification

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With the increasing adoption of digital banking and financial services, verifying customers through traditional in-person methods has become less practical and more time-consuming. To streamline the know your customer (KYC) process, financial institutions are now turning to video KYC—a digital and secure method to verify customer identities via video calls. Video KYC is reshaping how financial institutions onboard clients, making the process faster, more convenient, and compliant with regulatory standards. Here’s a deep dive into what video KYC is and how it works.

Video KYC (know your customer) is a process where financial institutions verify a customer’s identity over a video call instead of through in-person meetings. This method was introduced in response to the demand for contactless and remote services, allowing banks, NBFCs, and other financial entities to complete KYC requirements through video conferencing. The process leverages digital technology to authenticate customers in real-time, ensuring compliance with regulatory requirements while enhancing customer convenience.

Video KYC offers several advantages over traditional KYC methods, including:

Customers can complete the KYC process from the comfort of their homes, eliminating the need to visit physical branches.

Video KYC typically takes just a few minutes, allowing financial institutions to onboard customers quickly and efficiently.

By reducing the need for in-person verification, video KYC minimizes operational costs associated with physical infrastructure and paperwork.

The process involves document verification and facial recognition, enhancing security and reducing fraud risk. It also complies with regulatory standards, ensuring customer data is securely managed.

The video KYC process typically involves the following steps:

Once the customer applies for an account or service, the financial institution schedules a video KYC session. Some institutions may allow customers to initiate the session immediately, while others may require an appointment.

Customers need to submit specific identification documents, typically a government-issued photo ID (such as an Aadhaar card, passport, or PAN card) through a secure link provided by the financial institution. These documents are verified during the call.

In this step, the customer joins a video call with a bank representative or KYC officer. During the call, the representative verifies the customer's identity by cross-checking details on the submitted documents and taking a live photo of the customer. The KYC officer may ask the customer to hold up their ID next to their face to confirm identity.

To further prevent fraud, video KYC includes a liveness check, where the system verifies that the person on the video is live, not a recording or impersonator. Facial recognition software matches the customer’s face with their submitted ID photo.

Some financial institutions also use geolocation technology to confirm the customer’s location, ensuring they are within the permissible areas for opening an account. Background checks are done to cross-verify customer information with government databases and watchlists to ensure compliance with anti-money laundering regulations.

Once all checks are complete, the KYC officer gives final approval. The customer is notified, and their account or requested service is activated. This entire process often takes less than 30 minutes, making it highly efficient for customers and banks alike.

The Reserve Bank of India (RBI) introduced video KYC guidelines to provide a standardized framework for banks and financial institutions. Key regulatory guidelines include:

• Secure environment Financial institutions must ensure that the video KYC is conducted in a secure environment, with encrypted communication channels to protect customer data.
• Real-time verification Video KYC requires real-time verification with KYC officers who must ensure the authenticity of documents and customer identity during the call.
• Recording and documentation All video calls must be recorded and stored, and details such as date, time, and verification outcomes must be documented for regulatory audits.
• Geotagging and IP address tracking The RBI mandates that institutions use geotagging and IP address tracking to verify the customer’s location for additional security.

Challenges and limitations of video KYC

Despite its many advantages, video KYC does come with a few challenges:

• Internet connectivity Video KYC relies on stable internet connectivity, which may not be accessible to all customers, especially in remote areas.
• Technical challenges Customers who are less tech-savvy or unfamiliar with the video call setup may face difficulties completing the process smoothly.
• Data privacy and security Although highly secure, video KYC still poses data privacy concerns if not managed and encrypted properly, especially given the sensitive information involved.
• Limited coverage While widely accepted in banking and finance, video KYC may not yet be approved or feasible for certain industries or regulatory jurisdictions.

As digital services become increasingly popular, video KYC is likely to expand beyond banking to other sectors requiring secure customer verification, such as insurance, telecommunications, and e-commerce. With advances in facial recognition and AI-driven verification technologies, video KYC could become more accurate and reliable, further reducing fraud risks.

In the future, we may also see enhancements in AI-based liveness detection, making video KYC even more secure. Additionally, regulatory bodies worldwide are expected to provide more comprehensive frameworks, enabling broader adoption of video KYC across industries.

Video KYC is a game-changing solution in today’s digital-first environment, providing convenience, speed, and security in verifying customer identities.