Videos can revolutionize the KYC process for the Fintech Sector
Fintech has emerged as one of the fastest growing industry verticals in India as the country witnesses last mile internet connectivity and rising smartphone penetration.
The thriving sector however encountered a knee jerk reaction when the Supreme Court of India in September 2018 quashed the practice of fintech players utilising the 12 digit Aadhaar number for electronic know-your-customer (eKYC) process.
The Indian Banks Association (IBA), the industry body representing banks and financial institutions, had written to the Reserve Bank of India (RBI) seeking revised KYC (know your customer) guidelines.
Banks are worried about the impact on business due to the lack of clarity. Following this the industry switched to paper-based KYC verification, resulting in inflated expenditures as well as inconvenience for customers which lead to a major slowdown in the industry.
And while the industry players are still juggling with different options as an alternative of paper-based KYC verification, I am of the firm opinion that Video KYC is the most plausible answer to the prevailing turmoil in the industry.
Video KYC procedure involves completing a liveness examination (determining that you are a living person) via a series of procedures like moving your eyes in front of the camera. Such procedures eliminate the requirements of biometrics which bring in additional costs to the finance industry particularly on loans and products which come with narrow margins.
Digital Data Security is an extremely important aspect for the BFSI Sector today, especially when you are dealing with sensitive business information and customer data. A solution like this is the need of the hour, given the current environment in the industry. Video KYC needs to ensure that they remain compliant with the Data Protection Law that is soon to be released in Parliament.
While the government is aggressively focusing on Financial Inclusion, covering rural India still remains a challenge for BFSI players. Only 7 to 8 percent of India’s population has access to formal credit, leaving a massive population that needs to be reached for Financial Inclusion. Setting up a branch in every district or village doesn’t make commercial sense either, in such a scenario video-based verification solutions will enable the industry in swift processing of banking products across remote locations of the country.
For any loan underwriting, Personal Discussion comes as a major process for NBFC players which keeps a check on their bad loans. Under this process, a credit verification officer travels to meet every customer who has applied for a loan. Video verification in this regard will not only save on time and money but will also result in quick loan approvals via a more stringent verification and archiving the video interactions will also ensure a stronger case against the loan defaulters.
Amid the current crisis in the industry when the Indian Banks Association (IBA), the industry body representing banks and financial institutions, have approached Reserve Bank of India (RBI) seeking revised KYC (know your customer) norms, video-based verification solutions are the need of the hour.
An effective video verification solution allows customers to perform video calls with bank officials utilising devices like smartphones, tablets and laptops. Bank employees on the other hand avail the convenience of live screenshots, video recording, document collection, customer location etc. to complete their loan disbursal process.
The Future of Digital KYC
It will not be an exaggeration to say that future KYC processes will involve zero human intervention and will purely be driven by devices. Video comes as the most secure, efficient and accurate form of verification which caters to the rigid requirements of banks due to the nature of their business and is expected to become more mainstream with each passing day.