- Date : 17/01/2020
- Read: 3 mins
KYC process is bound to change with the approval of audio-visual KYC by the RBI, both for customers and financial institutions
Know Your Customer (KYC) processes for financial institutions will witness a major breakthrough as Reserve Bank of India is set to allow video-based KYC for establishing customer identity. Normally KYC formality is conducted by physically authenticating the customer details, which involves costs for the institution as well as the customer. However, video-based KYC will be welcomed by banks, non-banking financial institutions, wallet service providers and other financial institutions, all of whom need to conduct KYC documentations. This decision will allow RBI regulated entities (RE) to use their digital channels in the Customer Identification Process as a consent-based alternative, the method itself is being termed in the RBI notification as Video-based Customer Identification Process (VCIP).
This provision will enable the financial institution to authenticate its customer remotely through the customer's identity documents and by confirming related information. The physical presence of the customer within India will, likewise, be confirmed through their geo-coordinates. The institution will have to integrate the necessary applications required to conduct the video calling exercise as part of the KYC process. The RBI confirmed that the audio-visual interaction must originate from the domain of the RE by trained officials and that third-party applications will not be accepted for the purpose.
Related: NBFCs can use Aadhaar-based bank KYC to give loans
What constitutes KYC in financial institutions?
In the case of financial institutions, KYC is conducted by seeking documents that authenticate the identity and address of a person. Such documents, in case of a resident individual, can be Voter ID, Passport, Driving License, NREGA Job Card, a letter by National Population Register indicating the name and address or Aadhaar. PAN, or a Form 60 in lieu of it, is also a mandatory KYC document.
How will video-KYC be beneficial?
Audio-visual KYC can be done remotely and will require lesser manpower, both in terms of capturing and verification. It will be convenient for customers, particularly those who find it cumbersome to visit branches. Moving images captured by an audio-visual application will be far safer compared to passport size photos. The documentation will move from offline to online, resulting in ease of data administration. It is also bound to improve the turnaround time for KYC processing and improve customer experience.
Related: What are the new Aadhaar features- virtual ID and limited KYC, and how do they work?
Are there any risks attached to VCIP?
With the improvement in the KYC process, the level of fraud too can go up a notch. Use of pre-recorded videos, "deepfakes" etc. can change the output of a video. Connectivity can be a challenge in the case of remote locations. The quality of the visuals can be a factor if the resolution of the video is poor.
How is technology accepted globally for identification?
Many countries are using technology-driven information for identification purposes. It is estimated that nearly 120 countries use information such as a digital photograph, fingerprints and other biometric information in documents like electronic passports. This move will shift identification from having a document and producing it to something as simple as stepping in front of a camera.
With all these developments, it's important to know how to maintain the security of your personal information. Take a look at how you can prevent the misuse of your KYC documents.
Know Your Customer (KYC) processes for financial institutions will witness a major breakthrough as Reserve Bank of India is set to allow video-based KYC for establishing customer identity. Normally KYC formality is conducted by physically authenticating the customer details, which involves costs for the institution as well as the customer. However, video-based KYC will be welcomed by banks, non-banking financial institutions, wallet service providers and other financial institutions, all of whom need to conduct KYC documentations. This decision will allow RBI regulated entities (RE) to use their digital channels in the Customer Identification Process as a consent-based alternative, the method itself is being termed in the RBI notification as Video-based Customer Identification Process (VCIP).
This provision will enable the financial institution to authenticate its customer remotely through the customer's identity documents and by confirming related information. The physical presence of the customer within India will, likewise, be confirmed through their geo-coordinates. The institution will have to integrate the necessary applications required to conduct the video calling exercise as part of the KYC process. The RBI confirmed that the audio-visual interaction must originate from the domain of the RE by trained officials and that third-party applications will not be accepted for the purpose.
Related: NBFCs can use Aadhaar-based bank KYC to give loans
What constitutes KYC in financial institutions?
In the case of financial institutions, KYC is conducted by seeking documents that authenticate the identity and address of a person. Such documents, in case of a resident individual, can be Voter ID, Passport, Driving License, NREGA Job Card, a letter by National Population Register indicating the name and address or Aadhaar. PAN, or a Form 60 in lieu of it, is also a mandatory KYC document.
How will video-KYC be beneficial?
Audio-visual KYC can be done remotely and will require lesser manpower, both in terms of capturing and verification. It will be convenient for customers, particularly those who find it cumbersome to visit branches. Moving images captured by an audio-visual application will be far safer compared to passport size photos. The documentation will move from offline to online, resulting in ease of data administration. It is also bound to improve the turnaround time for KYC processing and improve customer experience.
Related: What are the new Aadhaar features- virtual ID and limited KYC, and how do they work?
Are there any risks attached to VCIP?
With the improvement in the KYC process, the level of fraud too can go up a notch. Use of pre-recorded videos, "deepfakes" etc. can change the output of a video. Connectivity can be a challenge in the case of remote locations. The quality of the visuals can be a factor if the resolution of the video is poor.
How is technology accepted globally for identification?
Many countries are using technology-driven information for identification purposes. It is estimated that nearly 120 countries use information such as a digital photograph, fingerprints and other biometric information in documents like electronic passports. This move will shift identification from having a document and producing it to something as simple as stepping in front of a camera.
With all these developments, it's important to know how to maintain the security of your personal information. Take a look at how you can prevent the misuse of your KYC documents.
