Video-based KYC likely in next six months as banks, NBFCs evaluate options

While no financial player has gone live with the process yet, many are said to be in the proof-of-concept stage and it is a matter of time before the process becomes a reality

Banks, non-banking finance companies (NBFC) and fintech firms are currently evaluating ways to adopt video-based customer identification process (VCIP) and are likely to implement the process within the next three to six months.

According to officials of various video-based KYC (know-your-customer) providers and fintech firms, many private banks, NBFCs and digital lenders are in the proof-of-concept (PoC) phase, just ahead of going live.

"Though no financial institution has gone live yet, we are engaged in PoC with more than half the players in this space. Obviously, many of these PoCs will turn into contracts. It is just a matter of time," said Saru Tumuluri, CEO at Khosla Labs. Veri5digital, the software services provider backed by Khosla Labs, has a product like 'veri5KYC video id' which enables financial institutions to establish the identity of the customer without any physical interface.

In January this year, RBI allowed video-based customer identification process (VCIP) as a method of customer identity. "With a view to leverage the digital channels for Customer Identification Process (CIP) by Regulated Entities (REs), the RBI has decided to permit Video-based Customer Identification Process (VCIP) as a consent-based alternate method of establishing the customer’s identity, for customer onboarding,” the RBI notification had said.

Under this provision, an officer of the financial institution can remotely vet a customer's identity through PAN or Aadhaar card and a series of questions. The agent will also have to ensure the customer is physically present within the country by capturing his geo-coordinates.

"This is taking time, as the adoption of video-based identification needs a lot of compliance with RBI norm. So, before going live, banks and NBFCs are ensuring that all necessary ground work is done," said Head of marketing at HyperVerge, Amrutash Misra. 

For instance, the RBI guidelines mandate that the audiovisual interaction shall be triggered from the domain of the financial institution itself, and not from third-party service provider like WhatsApp call or Google Duo. Similarly, trained officials will have to carry out the process of identification. "Given the regulatory mandates, no institution can implement it in a hurry. But, we expect adoption to begin in next three to six months," said Misra.  

HyperVerge, which also provides video-based KYC solutions, is also in talks with a lot of financial institutions including some private sector banks for adoption of its products.

Experts said that once implemented, it would have huge cost savings for the financial institution with quick turnaround time. "While a person can do two to three in- person verification (IPV) per day, video-based KYC can do around 50. So, the cost saving is around 80 per cent with quick turnaround time," said an official with a Bengaluru-based fintech player.

Digital lending players, who has seen a lot of disruption in the business model post Aadhaar verdict of Supreme Court, are likely to be the first adopters of the video-based customer onboarding process.

"Definitely, this is a good step and will be helpful for the digital lenders who can now onboard customers through this process. This will not only save cost but also decrease turnaround time," said Nupur Gupta, cofounder of digital lending firm, NIRA. "Once adopted, this will also increase the reach of digital lenders in rural areas of the country, which is limited to an extent today," she added.

While there are many clear positives to the new video-based customer identification process, but industry watchers said that banks and NBFCs would use it in certain areas of their operations. "In riskier propositions like lending beyond a certain amount, banks will still use the in-person verification process as part of due diligence. Here, video-based KYC can supplement but will not be the only method of verification," said an official with a fintech firm.