All About Video KYC
Video KYC is an integral part of the customer onboarding process and it has evolved with time. Do you know video identification is now the latest way to carry out the KYC process in real-time?
This blog post covers the basic information about Video KYC, including the process and use cases. Here’s the summary of the blog:
The year 2020 has brought some major shifts in the business world, digitisation being the significant change. With COVID-19 situation in question, organisations have actively shifted their operations online to capture the consumer market and reap the benefits. Among all the industries, banks and financial institutions are the ones to take a major leap in their customer onboarding process.
While consumers go digital, enterprises face a major challenge to strike the balance between security and customer experience. Which method to adopt to successfully comply with KYC/ AML regulations and provide the user with enhanced experience? Video KYC is one such solution that not only offers real-time customer onboarding but also caters to changing regulatory landscape.
What is Video KYC?
Video KYC or video identification is an online method of face-to-face identity verification in which organisations carry out their customer verification process through a video call assisted by a KYC agent. During the video call, the customer is required to digitally submit the identity documents for proof.
How is Video KYC different from traditional KYC?
Know your customer (KYC) is generally defined as the process to confirm the identity of the customer and identify any possible associated risk with the customer. To comply with KYC/AML regulations is obligatory for banks, financial institutions and every other business dealing with money. Traditionally organisations have manual customer identification program (CIP) in place to verify customer identity at the time of onboarding. This process could take up to weeks, enforcing customers to abandon the process in the middle.
Video customer identification process is the digital version of the traditional KYC process, just more secure, quick and cost-effective. Video KYC eliminates the paperwork streamlining the whole verification process with real-time results. Customers don’t need to physically visit the company and submit their identity documents to open their accounts. From registration to onboarding everything is done remotely.
The growing need for video verification
Video identification is the trending phenomenon nowadays and calling it the force behind the changing identity verification industry won’t be an overstatement. Apart from making the verification process time and cost-effective, the growing identity frauds are driving the need for a secure verification process in the form of video verification. Security is one of the key concerns of industries in this digital era and Video KYC solution is quite efficient to combat fraudster’s sophisticated tricks.
Video-based customer identification serves as a shield against various identity frauds that include:
Spoof attacks
With the advent in technology, fraudsters are becoming more sophisticated in carrying out frauds to fulfil their malicious intents in the form of spoof attacks. Using AI tools and technologies, imposters are tricking and surpassing verification systems with fake or stolen identities. This type of document and facial spoof attacks are hard to detect and is not recommended to rely on the system’s decision only. Video KYC incorporates both human and artificial intelligence to detect spoof attacks in real-time.
Synthetic identities
Synthetic identity theft is one of the most difficult fraud to detect because of its nature. What fraudsters do is they combine real pieces of information, for instance, social security numbers (SSN), with fake information to create real-looking identity. Such identity is hard to detect at initial stages of fraud but with video verification services synthetics identities can be detected easily, hence preventing potential
Deep fakes
Deep fakes are generally known as the falsified videos made using deep learning technology. They are made to fool the system and gain unauthorised access to the system. For instance, using deepfakes in face verifications systems, fraudsters can surpass the identity checks. Such videos are really close to real videos and not detected easily driving the need for more secure Video KYC solution.
Read more: Video-KYC – The ‘New Normal’ for Digital Customer Verification
How video KYC works?
Video KYC is similar to traditional KYC that refers to face-to-face video call as a channel for conducting the KYC verification process. This process requires users to confirm their identities by presenting valid ID document proofs during the video call. Instead of relying on various channels to complete the KYC process, video-CIP allows omnichannel customer engagement where face verification and document verification is conducted while staying on the video call.
What are the Requirements for Video KYC?
There are different requirements for countries around the globe regarding video KYC procedures and practices. Central banking authorities issue guidelines which are necessary for customer onboarding and identification. These obligations are issued in light of Anti Money Laundering and Know Your Customer standards which are significant for protecting financial entities and business alike.
Video KYC in India
In the early 2020, the RBI issued guidelines on performing remote verification of customers through Video-Based identification Process (VBIP). Due to the COVID-19 in full effect, this step was necessary to ensure social distancing and mitigate the spread of the virus. With the amendment in KYC rules, banks can now leverage digital technology to aid their Customer Identification Process (CIP).
The Securities and Exchange Board of India (SEBI) in April 2020 allowed investors to perform digital KYC procedures using Video In-Person Verification (VIPV). The verification process entails submission of identity documents through an online form or with an in-person video session with the verification expert. SEBI requirements issued on the VIPV process are listed below:
The VIPV process is initiated by the authorized Registered Intermediary (RI) official upon the consent of the investor/user.
The environment must be free from interruption, and the user should be easily recognizable on the camera.
The process should include random questions and the responses are recorded to analyse the overall liveness.
The user should display their signature, Officially Valid Documents (OVDs), and the KYC form. These details can also be validated through an OTP.
The verification expert should run a series of tests to ensure the Aadhaar card photo resembles the person in the video.
At the end of the session, the video recordings must be kept at a safe and secure place with date and time records.
Video KYC in Other Countries
Customer onboarding procedures using Video KYC have certain implications when it comes to different regions and countries. Below are listed some countries where video verification is used to conduct banking operations:
Spain
The financial intelligence unit in Spain, SEPBLAC (Servicio Ejecutivo de Prevención de Blanqueo de Capitales), requires banks to perform video-conferencing online ID verification of their customers during onboarding. According to the regulation on non-presence identification of February 2016, banks in Spain are obligated to practice video KYC guidelines when enrolling customers to their platforms.
Germany
In a circular issued by Germany’s supervisory authority BAFIN (Bundesanstalt für Finanzdienstleistungsaufsicht) in 2017, video identification procedures are necessary for banks to reduce money laundering activities. For this purpose, employees need to be trained to perform video KYC of prospects in real-time over a live video call to verify their identity documents. Video verification of banking customers ensures that anti-money laundering policies are carried out to the fullest.
Portugal
In Portugal, there are several authorities which take relevant measures to ensure safe and secure onboarding of customers. Some of them are listed below:
Portuguese Securities Market Commission
Bank of Portugal, which is the central bank authority of the state
The Bank of Portuguese
Although video KYC requirements are not mandatory in the country, financial entities and online businesses are allowed to perform video-based verification of their customers. It helps in complying with the recommendations of the Financial Action Task Force (FATF) and guarantees the safety of customers.
Some other regulatory authorities that allow organizations to perform video KYC verification of their users which are listed below:
In Latvia, FKTK (Financial and Capital Markets Commission) is a public institution which carries out its operations autonomously.
FINMA is a supervisory authority for the financial market in Switzerland.
The CSSF (Commission de Surveillance du Secteur Financier) is the entity responsible for financial regulation in Luxembourg
CNBV (Comisión Nacional de Bienes y Valores) also known as the National Banking and Securities Commission charters requirements to regulate financial systems in Mexico.
Which industries can benefit from Video KYC?
There has been a significant shift in consumer behaviour due to trending digitisation. Industries are looking for better online solutions to meet changing consumer demands and survive this digital era. Video KYC solution is one of the technologies that will soon be integrated into various sectors, in fact, some industries have already started incorporating video identification for customer onboarding.
Following industries can benefit from AI-powered video KYC solutions.
Video KYC for Banks and Financial institutions
Banks and financial institutions have always been under the tight scrutiny of regulatory authorities. With stringent KYC and AML regulations in place, customer verification during the onboarding process is mandatory for all financial institutions. Manual verification is no longer an option, digital onboarding is what every bank needs. Video KYC can prove to be an effective way to verify customers in real-time and comply with KYC/AML requirements.
Video KYC for Payment industry
With payment industry collaborating with other industry players, the need to put proper due diligence checks is greater than ever to prevent payment frauds and combat money launderers. Also, after the introduction of AMLD5, the payment industry now falls under the obliged entities to mandate the KYC process. The minimum threshold of prepaid cards has lowered from 250 to 150 euros. Payment industry can secure payments from fraudsters and prevent money laundering through video identification.
Video KYC for Insurance providers
Insurance companies are one of the sectors where fraud is done on a large scale. Through fake documentation and stolen identities, fraudsters are exploiting insurance industries to fulfil their malicious intent. Not only business owners but the victims are also deprived of their rights due to such heinous crimes. With video verification in place, insurance providers can ensure that only authorised and real customers are taking their services.
Video KYC for Remote companies
Amid COVID-19 pandemic, remote jobs and work from home are trending resulting in ghost employee frauds and other cybersecurity threats. Fraudsters and cybercriminals are taking advantage of the situation and getting unauthorised access to enterprise’ critical information and assets. Using Video KYC solution, companies can ensure that only real employees are being hired. Moreover, with ID verification, only authorised employees can access company profiles.
Video KYC for Mutual Funds
A place where different investors contribute their money to buy stocks and securities is called a mutual funds industry. This pool of funds is collected by a central authority or manager and is then used for various investments. The KYC process is one of the most essential parts of customer onboarding when it comes to new investors. Today, with the power of eKYC, online businesses for mutual funds can verify customer identities effortlessly.
PAN-based video KYC allows investors to validate investments across fund houses. Once the user submits their request for video identification, they receive an OTP on their mobile number, which is used to activate the video KYC live session with the verification expert. On successful approval of the applicant, a unique folio number is generated against the account with the fund which serves as an identification proof for future investments.
Video KYC for Non-Banking Financial Companies (NBFCs)
Unlike regular financial institutions, NBFCs do not have a bank licence but provide services similar to a banking entity. The main incentive of these companies is to provide financial services to a tailored group of people.
Contactless KYC for onboarding customers can be a game-changer when it comes to NBFCs. Online video KYC can be completed in a matter of minutes which allows NBFCs to acquire and onboard more customers. The Reserve Bank of India prompts financial companies to save user data on safe and secure databases or cloud storages. The user data from the video KYC process is used to validate their identity and safely kept for future verifications.
Video KYC for Crypto Industry
Today, with digital payments in popular demand, the cryptocurrency market has become the epicentre of virtual currency exchange. With the power of blockchain technology, safe and secure crypto transactions are performed over encrypted channels. But, due to the decentralized nature, it can be a potential avenue for criminal identities. Online crypto platforms need to ensure that users engaging with trading platforms are not possible fraudsters since mining of cryptocurrency is a growing concern.
To better identify a user’s identity in the crypto industry, video KYC identification is a good bet. Individual’s could be verified through a series of checks over a live video call including validating their original identity documents, submitting a photo of their face and providing other essential details regarding their personally identifiable information. This way, a verified portfolio can be created against the cryptocurrency users that can be used to carry out legitimate exchanges.
Video KYC for Real Estate
The real estate industry capped a revenue of $10 billion with more than 2 million people working in the sector. The primary concern of this market is buying, selling, leasing and marketing of property whether it’s residential, industrial or commercial. Unfortunately, money laundering is on the rise and real estate is no exception. According to an estimate, each year, a staggering $1.6 trillion is lost due to illicit money laundering through real estate.
The constant rise in crime calls for the need of a robust KYC/AML solution to stop fraudulent activities. Video KYC for real estate firms helps them take down criminals by spotting dubious identities and practising state-of-the-art Anti Money Laundering (AML) obligations which are issued by regulatory authorities. Associating ties with partners and brokers by validating them through video verification provides a quick and robust mechanism for performing Know Your Customer (KYC) for the client.
Video KYC for Car Rentals
Video KYC for car rentals can help tackle the problem of stolen vehicles and expensive car parts. Before renting out cars to users, rentals should ensure user credentials are legitimate. Criminals use fake IDs and documents to rent cars, and once they are successful in acquiring the vehicle, they are nowhere to be seen, leaving behind the owners in distress. Often times, they would steal valuable parts such as the engine, and wheels, and dump it to some scrapyard for the cops to find.
With new ways and means of customer verification, rental companies can now remotely verify their users through video verification procedures by taking into account original identity documents and verifying their authenticity. The video KYC process is almost as real as a live interaction with a person, which allows the verification expert to take down potential fraud attempts. With video KYC, car rentals can now rent their valuable cars without the risk of being stolen or compromised.
Checklist for best Video KYC solution
How to ensure your selected Video KYC solution is the best? Before taking the service, it is essential to do your homework regarding the features and functionalities of the solution. Only then you can assure that your selected solution is beneficial for your business. Here’s the checklist for best video KYC solution.
1. Global coverage
Due to digitisation, your customers can be from any part of the world. It is vital to opt for a solution that offers global coverage with proper language and document support.
2. Cost-effective
An effective Video identification solution is the one that allows reducing your KYC process costs without affecting the customer experience. For every business, pay as you go pricing feature is the best option.
3. Customised solution
It’s an understood fact that every business has different KPIs and business requirements. The video verification solution has different features to offer and not every enterprise needs all those features. The best solution provider is the one that presents a customised solution as per business needs.
4. Enterprise-grade security
Video KYC process involves handling valuable data of customers that needed to be secure according to international standards of data handling. You need a solution provider that offers top-notch encryption standards to prevent any kind of data theft and maintain consumers’ privacy.
5. Omnichannel user engagement
Customer satisfaction is the major factor that contributes to the growth of the business. A video KYC solution offering omnichannel for user engagement and verification adds to enhanced user experience because the user doesn’t have to switch channels to get the verification done.
This article was originally published in ShuftiPro
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