How Video KYC will help Banks and Financial institutions
What’s the first step that a customer has to take when he wants to avail any service from a Bank or a Financial institution?
It is the Know Your Customer (KYC) process.
KYC is a process where a financial institution verifies the identity and personal details of a potential customer. The RBI has made it mandatory for all companies to undertake KYC before offering any services to customers. While it has had a positive effect of reigning in unscrupulous activities like money laundering and fraud, it has its drawbacks too.
The conventional KYC process requires the applicant to personally submit identity documents to the financial institution. Being a paper form, it travels through a series of institutions before finally coming back to the Financial Institution requesting the KYC.
This process takes around 2-3 weeks which causes delays in onboarding the customer. Another risk is the potential loss of documents during the process. This may lead to re-initiating the process. Needless to say, this makes the conventional KYC method very expensive. This method is also prone to fraud as several cases have been reported where financial services like loans were availed using appropriated identities.
All this changed with the introduction of Aadhaar based OTP verification for KYC. This solution was more advanced than the traditional method and became a favorite with service providers. It reduced processing times and overcame many of the drawbacks.
But the Fin-tech industry relentlessly innovated to further streamline the KYC process. Harnessing technological advances like AI and Machine Learning, the V-CIP or Video Customer Identification Process was born. V-CIP was a solution whose time had come due to the very high internet adoption rates in India.
V-CIP is a secure, real-time consent-based audio-visual interaction tool. It is facilitated through a video call between a financial institution and a customer. During the video call, the customer shares identification information and documents with a representative. These details are verified during the call and a geo-tagged picture of the customer is clicked.
The solution got a legal acknowledgment with the Reserve Bank of India (RBI) notification dated January 9th, 2020. The notification legitimized V-CIP as a valid method for collecting and verifying the KYC information of customers.
V-CIP is a big step forward for the industry with multiple benefits for all stakeholders involved. Here’s a look at how it will help Banks and Financial Institutions.
- Faster customer onboarding
Customer onboarding was a tedious process with the traditional KYC process taking up to 15 days in some cases. V-CIP can finish KYC in a single video call. Banks can use the time thus saved to get customers onboard much faster. This means faster disbursal of loans, credit cards, etc.
- Reduced customer acquisition cost
Using V-CIP for processing KYC requests does away with the need for physical travel by the customer or Bank representative. It also does away with the physical processing of the documents. It results in a sizable saving for the Bank. While the physical KYC process could cost anywhere between INR 50 to 500, VCIP costs a fraction of that.
- Reduced turnaround time (TAT)
A typical KYC request takes several days and is susceptible to drop-offs since it involves several entities. On the other hand, VCIP is almost instantaneous and reduces drop-offs significantly as it is a real-time interaction between the customer and the representative.
- Minimization of risk
V-CIP deployment brings a very significant business advantage to businesses – Risk Mitigation. KYC processes are generally outsourced to third-party vendors who deploy FoS (Feet on Street) for document collection. Sensitive identity proof documents handled by vendors can be risky for all stakeholders. the customer and the bank. With V-CIP, the financial institution controls the verification process end-to-end.
- Positive customer experience
Customers choose service providers who ensure a hassle-free experience with the least number of steps. V-CIP allows potential customers to get their KYC done from the comfort of their homes or from any remote location. This seamless experience results in increased customer preference for businesses that offer this service.
- Growth of the financial services industry
Being extremely cost-efficient, Veri5 V-CIP is a boon for smaller financial services providers who target the lower end of the market. These micro-businesses don’t have budgets that allow them to afford physical KYC or other eKYC methods. V-CIP helps these businesses grow thus expanding the financial services ecosystem.
- Greater data security
The RBI has mandated financial institutions to store all KYC information collected during V-CIP calls at their end. Since all the customer data will reside at the Banks and the process has no intermediary, the data is safer as compared to other KYC methods.
The Veri5 V-CIP solution is at the cutting edge of authentication solutions. Using advanced Machine Learning and AI, the solution is not only very fast at capturing information but also equally fast at verifying it.
The introduction of V-CIP heralds a new era of faster, secure, and seamless KYC authentication. It will help Banks and financial institutions provide better customer experiences at a fraction of the cost. The biggest advantage is its potential to trigger a wave of financial inclusion among people who were until now unable to avail financial services due to geographical challenges.