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How Video-KYC Is The Future For The Financial Industry
The development of VideoKYC has been a blessing in disguise, as it ensures ease of business for financial service providers and their existing & potential client base.
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The last decade has seen a rapid integration of technology across several industries, be it education, finance or consumer goods. In the BFSI sector, the financial technology revolution started in India with the introduction of digital wallets, and has only expanded since. This has led to the expectation of leaner and faster financial procedures by both service providers & the end customer, especially at the initial on-boarding stage. And with the RBI’s guidelines for remote KYC onboarding coming in in Jan 2020, the stage could not have been better set for digitizing processes across the Financial industry.
Origins of VideoKYC and why it was necessary
The BFSI sector is replete with service providers such as insurance companies, Non-banking financial companies (NBFCs), banks, mutual funds, etc., which undertake KYC procedures to mitigate fraud and ensure that all applicants are verified accurately before onboarding. For applicants in remote areas, service providers have struggled with KYC procedures owing to the lack of access. Hence, the development of VideoKYC has been a blessing in disguise, as it ensures ease of business for financial service providers and their existing & potential client base.
All stakeholders in the BFSI sector have considered the Reserve Bank of India’s amendments to KYC guidelines in January 2020 a game-changer. Financial service providers now have the option to adopt Video-KYC solutions as an alternative to in-person KYC authentication. The policy changes are not just beneficial to lending institutions, but also lay the foundations for the next generation of FinTech start ups in the country, leading to the development of state-of-the-art technology-driven fraud detection solutions. Adding on to this, VideoKYC is also set to give a fillip to the financial inclusion agenda of India.
Challenges of traditional KYC procedures
The challenges faced by traditional KYC in a digitizing economy go beyond identification of fraudulent practices by applicants. Banks and other lending companies often invest heavily in conducting customer verification. It involves professionals, documentation costs, and hiring third-party agents who organize in-person visits to verify the identity of applicants.
Several small-scale lending institutions find it challenging to reach out to a wider customer base, possibly in rural and remote areas. In this scenario, a solution that saves time, effort and manpower hours in the verification process was needed to increase customer inclusion. A lengthy KYC procedure has also historically resulted in longer lending decisions by BFSI players ranging from large banks to local NBFCs.
VideoKYC is likely to radically alter this landscape, making it easier for service providers and banks to complete procedures. Not to mention, the additional inclusion of those that have thus far remained outside the financial system without access to credit, due to lack of credible documentation and remote locations.
The utility of VideoKYC
As more businesses go digital, and with the social distancing norms in place, VideoKYC has seen widespread adoption into the customer onboarding journey. There is hence the need for a digital solution that incorporates Artificial Intelligence & Machine Learning to make identification and analysis of collected data more streamlined.
For instance, business intelligence solutions providers such as Karza Technologies, offer robust and data-driven VideoKYC solutions. The results of using VideoKYC indicate the reduction of the turnaround time, better people management, and an increase in the number of new accounts. Be its facial recognition, liveness detection, or geo-tagging, VideoKYC detects the authenticity of profiles in a matter of minutes. Furthermore, it can verify geographical location while collecting data and running parallel checks through hundreds of publicly accessible databases.
The overall scope, scalability, and cost-effectiveness of mainstreaming VideoKYC in the financial sector are clearly evident. With more innovation and advancement in the next generation of technologies, VideoKYC and other such services are likely to be disrupted even further.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.