The Video KYC Evolution: How it will Benefit Banks and Financial Institutions?
Digital transformation has given birth to the latest technologies and innovations. People started using smartphones and computers to browse the internet. With digital transformations and technology advancements, businesses started creating innovations in financial services, called fintech. The advent of fintech has transformed the way banks and financial institutions function. Banks and financial institutions have gone digital and there has been an increase in online payment systems and solutions. This surge in online payments led to the need for properly verifying the users who want to use banking and financial services.
For this online verification, eKYC or Electronic Know Your Customer was formed. With eKYC, financial institutions can verify the identity of their customers electronically, using digital tools and technologies.
According to a study by Market Watch, it was found that the global market for eKYC was 1571.1 million US Dollars in 2021. It is estimated that the figure will rise to 2791.5 million US Dollars by 2030, at a CAGR of 21.5 percent during the forecast period from 2022 to 2030.
The above discussion and stats suggest that there is a great demand for eKYC and it’s increasing day by day. But, to make it even more convenient and secure, Video KYC came into existence.
In this blog, you will learn all about what video KYC is, how it works, its benefits for banks and financial institutions, and the use cases.
What is video KYC?
The traditional KYC method of verifying customer identities is a process where financial institutions collect and verify personal information and supporting documents in person. Here, the user has to visit a branch or a physical location of the financial institution to complete the KYC process.
Video KYC was invented to simplify and speed up the process in these digital times. A video KYC is a video and an advanced version of the traditional KYC process. It is a process that allows FIs (Financial Institutions)to verify the identity of customers remotely using video technology.
With video KYC, customers can complete the KYC process from their own devices like smartphones, tablets, computers, and laptops. This process typically requires recording a video of themselves using the camera on their device. The video must include a clear capturing view of a user’s face and government ID such as a passport or driver’s license held in hand.
Thus, the process of video KYC is simple and yet very important to understand before we talk about the benefits of video KYC and the use cases.
How does video KYC work?
Video KYC works just like physical KYC but the process is quite fast and smooth, due to its digital form.
Registration
The first step in the video KYC verification is registering for opening an account or using a financial service in the bank or the financial institution. This way you’ll get an option of KYC before moving further into the process.
Recording the video
The customer is asked to record a video of themselves, using their device’s camera. The video should include a clear view of the customer’s face and a government-issued ID, such as a passport or driver’s license.
Verifying the authenticity
The customer is asked to complete a series of actions, such as showing the front and back of the ID, tilting the ID to show the hologram, and holding the ID next to their face. These actions help to verify the authenticity of the ID and ensure that it belongs to the customer.
Submit the video:
Once the video has been recorded, it is submitted to the financial institution for verification.
Review and comparison – verification
The financial institution uses automated systems and manual reviews to verify the customer’s identity. This involves comparing the information on the ID with the information provided by the customer, and checking for any discrepancies or inconsistencies.
KYC completion
If the verification is successful, the customer’s KYC process is complete and they can proceed with their financial transactions. If the verification is unsuccessful, the financial institution may request additional information or documentation from the customer or may refuse to complete the KYC process.
How video KYC benefits banks and financial institutions
Now that we know what video KYC is and how it works, we must understand why it is actually need in banks and financial institutions. What are the benefits of it?
Fast and efficient process
The video KYC is fully digitize and an automat process for customer identity. Where a traditional KYC verification process may take up to 10-20 days, the video KYC verification process takes only a few minutes (usually 10 minutes) to process.
And the video KYC can significantly reduce the time and cost of the KYC process, compared to the traditional, manual process. This makes it more efficient and convenient for both customers and the FIs (Financial Institutions)
Enhanced security of transactions
The video KYC provides a secure and accurate way to verify the identities of the customer. Financial institutes need KYC verification in the first place to avoid forgery. Money laundering, financial crimes, loss of money, and security risks.
Moreover, the video uses advanced technology to verify the authenticity of IDs and ensure that the information provided matches the information on the ID. This helps in minimizing compliance risks and prevent financial fraud.
Improved customer experience
Video KYC can improve the customer experience by making the KYC process more convenient and user-friendly. Customers can complete the KYC process from the comfort of their own homes, using their own devices. This can help financial institutions build trust and improve customer satisfaction.
Minimize operational costs
In the video KYC verification, the customers can complete their KYC by sitting in their homes. They do not need to visit the bank or financial institution. So, the banks or FIs don’t have to work on maintaining the branch or customer handling.
This way, the cost of operations reduces significantly. Also, as video KYC is easy and simple to use. The employees do not require heavy training to assist them.
Competitive advantage
By adopting video KYC, financial institutions can differentiate themselves from competitors and stay ahead of the curve. This can help them attract and retain customers, and maintain their competitive edge in the market.
Use cases of financial institutions using video KYC
Account opening:
Generally video KYC is use for account opening in the bank. Here, the user can open a bank account online but needs to verify their identity before they start enjoying the services. Through video KYC, the customer can complete the KYC process in just 10-15 minutes.
KYC to activate dormant trading accounts:
There are many times when people open their trading accounts and then never use them. And when suddenly their interests reignite, they want to activate their accounts again. The traditional KYC can be difficult and tedious. But with video KYC, they can complete the process at their fingertips.
Merchant onboarding and verification for payment gateways:
For payment gateways, it becomes quite challenging to onboard merchants or businesses without proper verification.
But, with Video KYC the process of onboarding becomes smooth and seamless, and the payment gateway is able to onboard every business and enterprise irrespective of their size in a faster manner.
Conclusion:
Video KYC plays an important role in the process of verifications for banks and financial institutions. It provides the most automated, smooth, scalable, secure, and efficient process for both banks and institutions.
And video KYC will continue to be an important tool for customer verification for banks and financial institutions.
Additionally, as the threat of fraud continues to evolve, financial institutions may increasingly turn to video KYC. As a way to verify customer identities in real-time and reduce the risk of fraud.
