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New Video KYC regulations paving the way towards more Financial Inclusion

Rebin J Anselm
March 3rd, 2020 · 2 min read

Modern problems need modern solutions. With the advancements in technology, more sophisticated ways of identity counterfeiting possibilities arise. The regulatory bodies too are adapting the change and revising their regulations to prevent impersonation, spoofing, and other fraudulent activities. This clearly must deal with the Prevention of Money Laundering Act passed in 2002.

With the latest announcement of RBI’s regulations on accepting the regulated entities to use Video-based Customer Identification Process (V-CIP) for vetting of their customer’s identity and their proof of nationality, in this article, we analyze how the newly proposed method of KYC processing will proportionally be balancing the stringency of identity vetting and being fraud-proof.

Traditional KYC

With the traditional method of KYC compliant customer onboarding, an authorized officer from the regulated entity will be verifying manually all the OVDs (Officially Valid Documents) which is famously recognized as Original Seen and Verified Process also called OSV in the industry. Here there is a couple of obvious problems such as,

  1. Professionally forged ID documents cannot be identified with the naked eyes by the Customer agent
  2. Overdoing of KYC procedure impacts customer dropouts and increased customer turnaround time
  3. Corrupted authorities and mishandling of documents by the authorities in REs can also boost up the onboarding cost and encourage more fraudulent activities and even NPAs (Non-performing assets) in some cases

Other KYC announcements

Some above mentioned and other minor issues were already solved by eKYC that enables Aadhaar authentication for some authorized entities popularly named as KUAs (KYC User Agency) and AUAs (Authentication User Agency). This ensures the existence of details such as name, address, DOB, and other text details on the ID document against the respective ID card number. But still impersonation use cases aren’t covered. Request to enter OTP sent to their respective mobile kind of solved the issue but not to the fullest.

An illustration showing a woman walking by freely and securely as her identity is protected

As mentioned earlier, increasing stringency in the KYC procedure should not affect customer experience and comfort. DigiLocker initiative is one remarkable milestone in the digital pathway the regulators are taking to improve the ease of use. Offline Aadhaar verification by accepting the XML file of the Aadhaar is not only making the process simple but also ensures fool-proof identity vetting.

Video KYC

V-CIP famously known as Video KYC is the aftereffect of the long mature digital journey of RBI in improving fraud-proof customer onboarding without any compromise on customer experience. Video chat between the customer agent and client not only eliminates the need for the in-person presence of a Direct Selling Agent (DSA) with the client but also it holds as proof of the same dropping the corruption rate to almost zero. On the customer experience front, it improves the customer engagement an agent will be assisting the customer in real-time.

The agent must ask a variety of questions to avoid using pre-recorded videos for spoofing. Having the video connection encrypted end-to-end and the servers within the boundaries of the nation, complete control and security over the confidential visuals are achieved. Geo-tagging ensures the presence of the client within the national boundary as well.

As proof of identity and address, submission of one or many OVDs such as Aadhaar, PAN card, etc., are mandated. Having Aadhaar XML in place, more secure customer onboarding is promised. Still, ID documents scanning and verifying against the respective Government DB (UIDAI for Aadhaar, NSDL for PAN, etc.) is not more uncommon.

Proper maintenance of timestamp, screen recording of the client portal, mapping the customer agent with the recorded video before saving it to a safe database, and concurrent audit before opening the account, make the Video KYC solution surpassing earlier KYC methods and become a complete solution.

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