Last Updated on November 14, 2022 by Tayyaba Khan
With globalization on the rise, economies are becoming more interconnected, making financial institutions more vulnerable to illegal activities. As a result, the know your customer (KYC) wave is gaining popularity as a way for these organizations to protect themselves. KYC standards are put in place so that financial institutions can confirm the identity of their clients. They also aid financial firms in better protecting themselves against fraudulent activities like money laundering, corruption, and terrorism financing.
KYC is a process organizations in the financial industry use to get to know their customers and better understand their needs. This process helps build a strong relationship between the customer and the broker. It is essential to make sure that financial recommendations are made in the customer’s best interest. However, customers need to be aware of their KYC compliance obligations, including laws, regulations, and financial industry rules.
The KYC process is a set of standards financial advisors use to verify a client’s identity and learn about their financial profile. The process typically involves several steps, such as:
- Establishes the identity of the customer.
- Assesses the legitimacy of funding sources and understands the nature of customers’ activities.
- Evaluates the risks associated with a customer’s money laundering activities.
KYC processes are designed to help ensure compliance with legal and regulatory requirements. Compliance with KYC is, therefore, a priority for banks and corporations. Implementing KYC processes can effectively help reduce risk and improve compliance.
This article discusses KYC solutions and how they help reduce costs and increase revenue.
Table of Contents
What is a video KYC solution?
There are two ways to perform a KYC, offline and online. The offline mode requires you to visit a financial institution and submit a physical application. This process takes longer than the online mode. With online KYC, also known as video-KYC or vKYC, the entire process is digital and can be completed via video chat.
The RBI has legitimized the Video-Based Customer Identification Process (VCIP) to verify customers, enabling video KYC authentication to be used for onboarding purposes. In a video KYC process, a trained official takes a picture of the client posing with a legitimate KYC document, such as their Aadhaar card.
Besides digital signatures, the government allows e-documents to be used for vKYC. Video KYC verification has been proposed as another method of verifying an individual’s identity by an expert committee of micro, small, and medium enterprises.
How does a video KYC solution help your business?
According to the Prevention of Money Laundering (PMLA) Act, financial platforms, telecom companies, and lenders can obtain customer information digitally before acquiring them. It is incredibly cost-effective and time-saving to perform video-based KYC verification. Video KYC Solution reduces costs and increases revenue in financial-related businesses in various ways.
- Time-efficient and fast process
Many companies have tried to streamline their processes in the past, but their legal boundaries limited them. Insurance agents and representatives from other industries used to visit customers at home to complete all the necessary paperwork. Today, video KYC optimizes the process more conveniently and is time-saving.
- No travel expense
As mentioned above, agents from financial institutions used to have to visit customers at home to complete all documentation and verification processes. Companies had to spend a significant portion of their budget on travel expenses. However, with vKYC, the geotagging feature eliminates the need for this, saving companies time and money.
- No paperwork required
Companies have struggled in the past with storing physical paper records. They took up too much space and run the risk of being lost if not taken care of or organized in an archive. A video-based KYC system helps keep all shared KYC details secure and neatly arranged. This is because the call recordings are stored in the cloud, which helps prevent data leaks.
- Streamline the process through automation
Companies can automate customer onboarding through document digitization, verification, image quality checks, and fraud detection. All of these minimize the work and streamline the process. Organizations can focus on other areas needing attention by automating customer onboarding and providing a great experience to new customers.
- Elevate customer experiences
From the customer’s perspective, they just need to follow the easy steps of video KYC to continue. This simplification and easiness enhance the customer experience.
- Addressing more customers per day
Businesses are turning to modernized video KYC solution to efficiently and cost-effectively serve more customers. Companies can save time and money by using these methods while still providing quality service.
- Detects and eliminates fraudulent transactions
Companies can detect fraudsters through live video conversations by extracting details from documents in real-time and matching them with official databases. AI-based solutions can help eliminate the uncertainties associated with fraudulent identity.
- Secure and transparent
The primary reason regulators mandate KYC verification is to prevent fraud, money laundering, and other financial crimes. Upon completion, a video KYC can be archived and accessed for record-keeping and compliance purposes.
Video KYC verification is a game-changer for companies in providing enhanced customer experiences that increase retention and revenues. By offering this technology, businesses can provide customers with ease and comfort. These two key factors motivate customers to stay in the finance sector. Additionally, video KYC solution reduces business costs, leading to even more revenue growth.
The Reserve Bank of India has legitimized VCIP for verifying customers and onboarding through video KYC solutions. The workload of finance institutions and corporates has therefore undergone significant reduction. As a result of this change, these organizations have also witnessed a reduction in costs and an increase in revenue – making it a win-win for all parties involved!
Businesses are adopting AI-based Video KYC solutions more frequently as a result. Through powerful AI engineered for conversion and optimized for productivity, agents can be more productive throughout the day by extracting and auto-populating information. Overall, companies increase revenues considerably using robust Video KYC solutions.