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How Fintechs and customers will benefit from video KYC

India is reportedly the first country to bring in Video-based KYC into customer verification for financial institutions.

February 03, 2020 / 08:27 PM IST

In a ground-breaking action on January 9, 2020, the RBI (Reserve Bank of India) has finally got on onboard with the long-debated concept of Video KYC (Know Your Customer) with an official announcement. A statement said: “with a view to leveraging the digital channels for Customer Identification Process (CIP) by Regulated Entities (REs), the Reserve Bank has decided to permit Video-based Customer Identification Process (V-CIP) as a consent-based alternate method of establishing the customer’s identity, for customer onboarding.”

It is an amendment to the existing guidelines for KYC sited in the Prevention of Money-laundering (Maintenance of Records) Rules, that was finalized in 2016.

Fintechs, financial institutions, and the non-banking financial companies were long rooting for this initiative. However, India’s apex bank had kept the idea under the radar.

India is reportedly the first country to bring in Video-based KYC into customer verification for financial institutions. This step has been well-received by the various players in the industry.

Bala Parthasarathy of MoneyTap (CEO and Co-founder) said, “This is good news for customers and the industry. It helps us serve our customers more efficiently. Video KYC makes the process simpler for the customers as it combines multiple processes of digital checks. It will also prevent identity theft issues as customers will not have to submit physical copies of their KYC documents.”

In the way remote V-CIP (Video Customer Identification Process) works, the customer is first asked for consent to produce their identity and conduct video-KYC. Thereafter, the verification officer has to ensure the customer’s presence in the country through geotagging. Subsequently, the customer has to answer a few questions and produce their PAN or Aadhar card. The regulated entities are permitted to use screen-shot (during the video call) or live photo of a customer as a proof of identification to complete the KYC process.

Coming to the security issue, the industry experts believe that instead of the 3rd party apps like Google Duo and FaceTime, Regulated entities should have their app. Moreover, RBI has encouraged the use of AI for better identification, process integrity, and customer security. The non-regulated entities are still unauthorized to conduct V-CIP.

Video KYC is a boon to Fintech companies as they were the brains behind the idea and were clueless about the future of video-based digital identification so far. The lack of physical branches for KYC leads to a decline in their user base. According to Veri5Degital, after Aadhar nullification, a 40% nosedive was seen when Fintechs went back to manual KYC. Companies such as Synechron, Idfy, Syntizen, etc. are already gearing up for the service.

Faisal Husain (CEO & Co-founder), Synechron cites, “Synechron is working with banks globally to use technology like Optical Character Recognition (OCR) and Natural Language Processing (NLP) for KYC; it cross-references and validates the evidence to uncover missing, misattributed or inconsistent data and dramatically reduces remediation time and errors.”

In final words, Video-KYC is a giant technological leap for the banking sector. Like any novel system, it might face some obstacles in terms of customer trust, lack of centralized platform, non-REs on the bay, etc. However, the potential for growth surmises them.

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Moneycontrol News
first published: Feb 3, 2020 08:27 pm