Note: RBI(Reserve Bank of India) has issued a notification dated 09th January 2020, officially recognizing the Video-Based Customer Identification Process (V-CIP) as a method of customer identification.
Video KYC Solution
The recent amendment in The Prevention of Money Laundering (PMLA) Act 2002 by the Ministry of Finance allows several modes of capturing details of customers electronically. The notification states that the government should bring in, Video KYC to capture customer details electronically. Subsequently, RBI has legitimized the Video-Based Customer Identification Process(VCIP) as a means to verify customers, allowing onboarding via video KYC authentication. You can read more about RBI’s V-CIP and what it means for financial institutions here and here.
Any person who uses their Aadhaar card for identification can now carry out an Aadhaar verification for banks. The proof of possession of the Aadhaar card has been added to the list of official documents needed for verification.
Video KYC involves a trained officials taking a live photo of the client with official and valid KYC documents such as the Aadhaar card or any other government KYC document during Video KYC. Digital signature and equivalent e-documents have also been allowed by the government as a way to complete the Video KYC process.
The expert committee of micro, small, and medium enterprises (MSMEs) has suggested that the video KYC verification can be used as another way to verify the identity of a person.
What is Video KYC?
Video KYC procedure is an automated & video-based customer due diligence process involving digital KYC verification for the purposes of customer onboarding. Video KYC allows businesses to utilize document image capture, digital ID validation & a face-to-face interaction with a trained official to digitize and expedite the KYC process.
Video KYC identification has been mandated in various forms by regulators, including V-CIP for banks & NBFCs, VBIP for insurance companies & VIPV for SEBI-registered intermediaries.
The shift to video-based KYC methods is welcome, especially due to the increased demand for digitized methods in response to the conditions of the COVID-19 pandemic; and has already resulted in massive benefits for the BFSI sector and for customers by reducing operational costs & allowing contact-less customer onboarding.
How Video KYC Boosts Businesses
The PMLA Act states that investment platforms, telecom companies, and lenders can acquire details of the customer digitally before acquiring them on their platforms. Performing video-based KYC verification is extremely cost-effective and saves entities a substantial amount of time. A report by the expert committee of MSMEs has suggested certain steps to perform KYC via video.
The following steps must be followed to perform a video-based KYC:
- Customers of MSMEs need to register on the website or mobile app of the entity
- The customer schedules a date and time for the onboarding process to start.
- An official from the MSME initiates the video KYC process by inviting the customer to a video call
- The customer’s Aadhaar card is then verified. This is done through Aadhaar authentication for banks and offline for other entities
- The official asks the customer to display their PAN card, whose image is captured and authenticated
- The official also verifies the customer’s real-time location using geo-tagging software
- The official then matches the customer’s image captured on video with the image in the PAN card using facial matching capabilities
- The official asks the customer three random questions to ensure that it is a live interaction
- The session is concluded and the official decides whether or not to accept the customer’s video KYC information
- Finally, the official stores the recorded video interaction for future use
Image proof of identity and address with the video id KYC is uploaded to the platform for digital identification. Once the verification process is complete the customer is duly informed. If any customer is not comfortable with the digital process an option of a physical visit by the MSMEs representative is possible.
Advantages of Video KYC in India
- Video KYC allows customer verification using facial matching, automated data extraction, and Machine Learning techniques and is done all in real-time
- The process for video KYC can be done from the comfort of your home. All you need is a laptop, smartphone, or tablet with a working internet connection
- All interactions are recorded and stored for the future
- Onboards customers extremely fast using Artificial Intelligence (AI)
- The processs lashes onboarding costs by 90% and drastically reduces turnaround time from 30-20 days to 10 minutes
How Does Video KYC Impact Businesses in 2023?
Video KYC in 2023 is pivotal in guiding businesses toward a comprehensive understanding of the ever-changing market standards, becoming an essential technological requirement for financial organizations. The landscape of video KYC has evolved significantly, empowering businesses to strategize, compete, innovate with emerging technologies, grow, and align their services with the needs of an evolving customer base.
According to the research report “Regtech: Cost Savings, Technological Impact & Vendor Analysis 2018-2023,” AI-driven verification systems are poised to elevate KYC checks for anti-money laundering, replacing inefficient paper-based methods. The projections indicate that AI’s adoption in KYC for banking and property sales could result in annual gross cost savings exceeding $700 million by 2023, marking a substantial increase from 2018.
AI-powered identity solutions can significantly minimize resource requirements for identity verification and, when integrated into cloud-based systems, alleviate the compliance burden for financial institutions.
Smart KYC verification also serves as a risk mitigation tool, offering insights into economic factors and preemptive strategies to enhance resilience. Exploring the latest KYC trends is crucial to remain at the forefront in 2023 and adapt to the changing dynamics.
Key Regulations of KYC Impacting Business Scenario –
- AI-based Digital Video KYC: Businesses increasingly turn to digital video KYC methods to keep up with the shift towards digital verification and fast onboarding. Utilizing cutting-edge technologies like AI & ML-powered digital KYC solutions, low-code verification APIs leveraging biometric authentication, and blockchain-based solutions streamline video KYC verification.
- Non-Financial Sector Transaction Monitoring KYC/AML policy 2022-23 extends its regulatory framework to non-financial sectors such as real estate, dealers of precious metals/stones (DPMS), and other Designated Non-Financial Businesses and Professions (DNFBPs), mitigating money laundering and terrorist financing risks in diverse industries.
- Digital Data Privacy and Protection: With the digital personal data protection bill, digital video KYC has stricter requirements and broader data protection infrastructure to safeguard customer data, ensuring KYC information is used only for intended purposes.
Banks, FIs, NBFCs, and business organizations can leverage innovative digital video KYC solutions to streamline the KYC process, comply with KYC regulatory compliance, and combat anti-money laundering and other financial crimes with AML & PEP screening. Digital KYC platforms with robust security measures ensure customer trust and protect against breaches improving transparency and promoting safety standards of business organizations.
Video KYC: Pioneering the Future of Identity Verification
According to the Video KYC Market Report, “The global Video KYC market was valued at USD 212.68 million in 2022 and is expected to reach USD 499.57 million by 2028.”
The Video KYC Market Report paints a compelling picture of the journey ahead, showcasing an impressive growth trajectory. The ever-increasing need for secure and convenient identity verification solutions across various sectors propels this extraordinary growth to ensure that businesses remain at the forefront of security and customer-centricity.
Intriguingly, the surge in demand for digital identity verification is driven by factors such as the proliferation of digital transactions, stringent regulatory compliance, and the rising emphasis on seamless customer experiences. By integrating AI-driven facial recognition, biometric authentication, and real-time interaction, video KYC will reshape the verification and onboarding landscape, becoming a fundamental enabler of trust and efficiency in the digital ecosystem.
Conclusion
SignDesk has launched a Video KYC product called Scan.it, incorporating the vipv technology, which helps users submit KYC information & get themselves verified via video. Customer experience is improved through digital video while saving on several KYC costs & reducing onboarding time to 10 minutes.
SignDesk Video KYC onboard customers securely and within seconds using AI-based KYC validation and automated document verification. Video KYC is widely applicable in client on-boarding, user registration, processing high profile transactions, and re-verification of existing users.
Scan.it also ensures regulatory compliance with the RBI guidelines and replaces the outdated authentication mechanism with a cutting edge and streamlined video-based KYC solution.
Curious about how we automated onboarding? Book a demo with us now!