What is KYC and Video KYC? It’s permissibility, safety and benefits
The term Know Your Customer (KYC) has become quite popular lately, especially in the wake of all the regulations by governments to combat illegal financial activities. However, it isn’t the only term that you need to be familiar with if you want to stay compliant while conducting transactions or storing data on behalf of your customers. KYC was actually preceded by an older term known as Client Onboarding, which refers to the process of completing customer identification forms before conducting business with them.What is KYC? Why it is important? Know Your Customer (KYC) is an identification process that is required when opening a bank account. A copy of your proof of identity, proof of address, proof of source of funds must be provided before you open a bank account. Banks are required by law to collect information about you, verify it, and maintain records even after the account is closed. This helps prevent money laundering.Reserve bank of India (RBI) has mandated all Indian financial institutions, banks, and other financial organizations to verify both the identity and address of all customers who are to carry out any kind of financial transactions with them.What is Video KYC?A method that uses video conferencing solutions in order to confirm an individual’s identity with financial institutions. The process works by allowing businesses to confirm a client’s identity through video calls, which are recorded for reference at a later date. This allows businesses to keep their client data secure whilst also creating accessible records of conversations between themselves and their clients. While it has been around for a number of years, we have seen an increase in its usage during 2017 as more individuals became aware of its security benefits. Is Video KYC full KYC?In January 2020, RBI had allowed a video-based customer identification process for individual customer onboarding by regulated entities of RBI i.e customer onboarding by banks, so Yes, video KYC is full KYC now.“Taking forward the initiatives of the Reserve Bank for enhancing customer convenience, it has been decided to rationalise certain components of the extant KYC norms. These include extending the scope of video KYC known as V-CIP (video-based customer identification process) for new categories of customers such as proprietorship firms, authorised signatories and beneficial owners of legal entities and for periodic updation of KYC,” said RBI Governor Mr Das. Is Video KYC safe?Yes, video KYC does not store any sensitive financial information. It only stores information related to know your customer (KYC) norms. The video obtained through mobile-based interaction reflects how a person looks like, so no two people can be tagged on same mobile number even if their Aadhaar cards are different. If someone tries to use another person’s mobile number then biometric details will get rejected by Aadhaar system automatically after saving personal data of real user in its database. This feature makes video based KYC more secure than eKYC done through OTP sent on phone number linked with bank account/Aadhaar card for authenticating user’s identity while undertaking financial transactions or carrying out applications like opening new bank accounts, getting SIM card or acquiring loans etc.Benefits of Video KYCVideo KYC is a more reliable and efficient way to verify the identities of clients or employees compared to traditional paper-based procedures. The Video KYC process will increase customer satisfaction as it replaces tedious paperwork with instant verification. Also, data stored on videos are stored forever and can be used as proof of compliance with Know Your Customer (KYC) policies in case of any investigations. Moreover, financial institutions using video verification have higher ROI compared to those using less secure methods or going without any form of verification at all due to legal requirements.Earlier, to open a bank account, an individual had to fill up multiple forms at different banks as well as submit physical documents like ID card, address proof and PAN card. This process of collecting all required information was known as ‘Know Your Customer’ or ‘KYC’. However, with time and technological advances, we have introduced video KYC which has made things easier for customers. The term ‘video KYC’ refers to digital identity verification through live-streaming of videos on mobile phones or tablets for purposes such as opening a bank account or obtaining a SIM card.