Finance Business

Video KYC Vs eKYC: What are the Key Differences?

Digitalisation has led to the transformation of several industries, and the NBFCs and other financial institutions are no exception. The Covid pandemic has aggravated the need for minimal or no contact between customers and the financial institution to ensure everyone’s safety.

Video KYC gained recognition in 2020 due to the notification released by the Reserve Bank of India permitting the use of Video KYC for customer verification. This led to a dilemma between customers and financial institutions regarding the choice of opting for Video KYC or E- KYC

This article discusses the key differences of e- KYC Vs Video KYC and their impact on the Non – Banking Financial Companies (NBFC)

What is Video KYC Vs eKYC

Video KYC refers to an automated and video-based customer due diligence process. The verification takes place through a video call assisted by a KYC agent. It is a two-stage process which includes a video call and a review. The first stage involves the capturing of photographs and other relevant documents by the customer through a live video call with the help of a KYC agent, which the other representatives review in the second stage of the verification process to check the authenticity and accuracy of the submitted documents for approval or rejection of the KYC of the customer.

E- KYC, often termed as paperless KYC, refer to the process of verification of the credentials of a customer through electronic mode wherein the verification takes place through the service provider, which can access the details of the Aadhaar Card of the customer from the Unique Identification Authority of India (UIDAI) database.

So eKYC Vs Video KYC can be differentiated on the basis of meaning as discussed above

What are the Key Differences in Video KYC VS E KYC

The key difference in e- KYC Vs Video KYC can be traced through the following analysis

Process of e KYC    

The process of eKYC is carried on by following the below-mentioned steps

• Creation of an account on the KYC Registered Agency
• Providing the Aadhar Card Number for verification
• Submission of the attested copy of E- Aadhar Card
• Agreeing to the declaration terms

Key Issues with E KYC

Although e- KYC reduces the hassles of the physical KYC, various issues are related to the eKYC, such as:

Inaccuracy in the Data provided by the Customer

The purpose of eKYC is to ensure that the customer would use the particular account to access financial services for which they must provide the phone no. and email ids with the application. The issue, in this case, is that the applicants often provide the inactive id and phone no, which hinders the eKYC process. The Video KYC process enables the officers to cross-check such credentials during the video call, which can effectively curb the issue of inadequate data of the customers.

Inability to detect the liveliness of the applicant

One of the major issues with eKYC is the inability to check the liveliness of the applicant, as most of the information is supplied through the documents provided on the online portal. This often leads to identity theft because the customers often upload the documents of a fake or deceased person to get the KYC verification in such a name, which can be highly misused.  This issue can be easily dealt with video KYC making video KYC a good option between eKYC Vs Video KYC

Submission of Forged Documents by the Applicant

Another issue with eKyc  when comparing between eKYC Vs Video KYC is the submission of forged documents by the applicants, where the applicants upload fake documents on the website to pass the verification process. However, video KYC tackles this issue as it allows the officer to direct the applicant to display the documents during the video call to check the document’s authenticity.

Verification by Unauthorised Officials

Often some imposters used to disguise themselves as an officer of the KYC department to misuse the information provided by the applicant for some fraudulent gain. This issue can be prevented with the help of video KYC as the applicant can have a face-to-face conversation with the officer and even demand the officer’s identity card during the video KYC process.

Hence when drawing a comparison between eKYC Vs Video KYC one can come across these issues with eKYC

Video KYC in India

Video KYC was introduced through the notification dated 09.01.2020 by the Reserve Bank of India, which amended the PMLA or Prevention of Money Laundering Act 2002^[1], where the authority permits all NBFC and Fintech start-ups to opt for Video KYC as a method of customer identification.

Eligibility for Video KYC

The eligibility criteria for Video KYC are enumerated below –

• The applicant should be 18 years of age or above 
• The applicant must be a resident of India

Prerequisites for Video KYC

Given below are certain prerequisites that must be fulfilled for the process of Video KYC

• The background during the video call should be white
• There should not be anyone else in the frame
• The face of the applicant must be visible during the video call       
• When displaying a document for the live capture, it should be displayed vertically from above
• The ”location” feature on the applicant’s device is turned on
• The link provided for the video process must direct to a website with the bank’s domain name
• The applicant must ask for the officer’s identity card to ensure the process’s authenticity.

Documents Required for Video KYC

The documents required for

• PAN card
• Driving licence
• Address proof
• Bank statements

Guidelines of Reserve Bank of India regarding Video KYC

The Reserve Bank of India has provided the following guidelines for the Video KYC.

• The consent of the applicant but be obtained before initiating the Video conferencing Process.
• The live photograph of the customer must be geotagged to confirm the customer’s location, which should be within the boundaries of India.
• A proper application for the Video KYC should be developed by the regulated entities and provided at the specific customer touch points. The use of any third-party platform for the same is strictly prohibited.
• Video KYC must be initiated from the domain of the lender and stored securely and safely by the lending entity.
• The application can only be accessed through a time OTP, live OTP, login ID, or password.
• The necessary documents can either be uploaded or captured by Video.
• The non-banking entities are only permitted to use offline Aadhar Verification. However, suppose the customer does not wish for the same. In that case, any other documents can provide the relevant details provided that the documents must be officially valid, which can be uploaded on the Digilocker government platform.

Process of Video KYC

The following procedure is required to be followed to successfully complete Video KYC.

• The applicant must fill out the application form by providing consent to access the Aadhar Card details to the lender entity.
• After providing the required consent, the next step is to give the location of the applicant’s phone to geotag.
• Further, the applicant is required to upload the officially valid documents. It is essential to ensure that the details provided in the documents are accurate, as the same shall be used while filling up the application form.
• The lending entity would provide a message concerning the verification of details provided by the applicant.
• Upon validating the submitted details, the same message would be considered as the customer’s signature on the application form.
• After completing the above-mentioned steps, the bank would provide a video call link or automatically direct the applicant to the webpage for the video call from their website.
• An officer would initiate the video call for the verification of details provided by the applicant.
• After such verification, a photograph will be captured during the live video call, which shall be cross-checked with the photograph provided in the application form. This is often done with the use of facial recognition technology.
• The applicant may be required to display the documents submitted earlier, which shall be captured through software designed for this purpose.

• The officer might ask some questions regarding the documents supplied by the applicant.
• After the call’s completion, the officer makes recommendations regarding the approval or rejection of the applicant’s application. Upon successful verification, the application form shall be digitally signed by the officer.
• The officer shall take a printout of the application form, and the applicant needs to sign the application form, which shall be scanned and uploaded onto the system.
• The original hard copy might be returned to the applicant.

Therefore, another difference between eKYC and Video KYC is the process of the two KYCs

Why is Video KYC the Best Solution for NBFC?

Video KYC is the best solution for NBFC due to the following reasons –

Faster Customer on-boarding Process

Video KYC enables the completion of the KYC process in a single video discussion in a few hours. NBFCs can leverage it to on-board the customers much more quickly, which implies that financial services like loans, credit cards, and other banks or other services provided by the NBFCs can further be disbursed faster.

This makes it a better option between eKYC Vs Video KYC

Lower Cost of Customer Acquisition 

Using video KYC to complete KYC applications eliminates the need for the customer or NBFC agent to travel and reach the customer to carry out the onboarding procedure. It also helps avoids the need for physical document authentication and processing, thereby making it less expensive, resulting in a lower customer acquisition cost by the NBFCs which is another benefit between eKYC Vs Video KYC

Better Time Management

Another  advantage of Video KYC,  while discussing eKYC Vs Video KYC is that it , reduces customer drop-offs due to its real-time contact between the consumer and the agent. Fewer drops lead to better time management, facilitating a smooth completion of the Video KYC process.

Mitigation of Risks

Mitigation of risk is a huge commercial advantage that video KYC adoption provides to the NBFCs Video KYC allows the NBFCs have complete control over the authentication process, which helps avoid fraud risks making it a great alternative between eKYC Vs Video KYC

Enhanced Customer Experience

 The customers opt for Video KYC among  eKYC Vs Video KYC  as allows the customers to get a contactless KYC procedure which was a crucial aspect, especially during the Covid pandemic. This contactless verification, along with the digitalisation of the whole process, has enhanced the customer experience, which provides an added advantage to the NBFCs.

Serving to the Requirements of the Industry 

Video KYC is a brilliant alternative for small banking and financial services that cater to a niche market as it’s incredibly cost-effective. Video KYC helps grow these companies and the NBFCs, broadening the financial services ecosystem which makes the  institutions opt for video KYVC when deciding between eKYC Vs Video KYC

Secured Data

NBFCs are bound to store all the customer KYC data obtained through video KYC conversations on their servers. Compared to other e-KYC  Vs Video KYC techniques, the customer data is secured, as all the user data will be stored at the NBFC, eliminating the intermediary throughout the KYC procedure.

Conclusion

The Video KYC is gaining acceptance in the NBFC sector due to its cost-effectiveness and easy onboarding process, catering to an increased customer base for the NBFCs. The aspect of contactless verification through Video KYC has encouraged numerous people to reach out to NBFC for loans and other financial assistance. In addition to this video, KYC has immensely contributed to the accuracy of customer due diligence, which prevents the issue of money laundering and other numerous financial frauds and crimes, providing relief to the NBFCs, which can be an essential determinant while deciding between EKYC and Video KYC.

Read our Article: RBI Initiates Video Based KYC as an Alternative to already present E-KYC Facility