All about Digital KYC Verification
KYC means Know Your Customer. Financial institutions such as banks, Non-Banking Finance Companies (NBFCs), and other lending institutions which deal with money, mandate KYC verification for a customer before providing any financial service.
Digital KYC verification, also referred to as paperless KYC, is the process of verifying the customer’s credentials by deploying internet and technology. Many background check companies in India are using different Digital KYC Verification methods to verify customers’ identities and backgrounds remotely with the help of smartphones and laptops due to restrictions imposed due to the Covid-19 pandemic. Let’s dive deep and get more insights into this crucial aspect essential for providing financial service.
Half KYC or e-KYC
It is also known as limited KYC, or minimum KYC, which involves authorised financial institutions and their agents verifying prospective customers’ identities and addresses through Aadhar Card authentication. In other words, there will be no physical documentation necessary, and the verification will be completed online. Most background check companies in India use this method for onboarding 99% of the adults seeking a financial service of some sort. The essential benefits of this type of Digital KYC verification method are,
- Faster processing time than traditional KYC process
- Reduced customer drop-off due to delays in KYC verification
- It reduces identity fraud to a large extent
- Better customer experience will create a loyal customer base
- Quicker and flexible access to most banking services
- It helps the organisation to gain trust among customers and also with the RBI
- Reduced paper usage and loss of documents
- Tracking the documents digitally is a lot easier
- Employees can use remote access to carry out the KYC process
- It improves overall efficiency and reduces human errors
Some drawbacks of e-KYC are,
- Aadhar number must be verified online to use the e-KYC facility.
- The same mobile number used for registering Aadhar must be used for e-KYC verification.
- There might be chances of funding restrictions with this method.
- If there is any mismatch between details seeded in the Aadhar and Pan card portals, there might be issues in completing the KYC verification process.
Video-based Digital KYC Verification
Due to the pandemic, RBI made some amendments in 2020, allowing Video-based Digital KYC verification to avail financial services. This method is considered equivalent to full KYC and allows the customer to complete the KYC process from anywhere in the world. To use this facility, all you need is a good internet connection, laptop or mobile, and access to a camera for live video recording. For banks, VCIP (Video-Based Customer Identification Process), for Insurance firms, VBIP (Video-based Identification Procedure), and SEBI-registered intermediaries, VIPV (Video In-Person Verification Process) are approved by RBI for Video-based Digital KYC Verification.
During the video-based digital KYC verification process, a live video recording is authorised by the Bank’s official with the customer. The user can connect remotely via video call, and the verifier will authenticate the identity proof and address proof documents. Then a liveness check is done by asking random questions. Later, the official will establish the user’s location through geotagging, and finally, the recording is documented, and the result is given to the customer. The essential benefits of this type of Digital KYC verification method are,
- Remote onboarding of customer
- Real-time KYC verification can be achieved
- The number of customers handled in a day will be increased exponentially
- Reduction in KYC completion due to less human resource and infrastructure requirements
- Customers can complete the process from home, office, or anywhere in the world without hassles
- Minimal to zero identity frauds
- Data retrieving and tracking is easy
- Flexibility allows streamlining the entire process through automation and AI technology
Some drawbacks of e-KYC are Video-based Digital KYC Verification are,
- High initial setup cost
- Skilled workforce required for handling the operation
- High internet and camera quality may be necessary
- User must have basic knowledge of using the service
Prerequisites for completion of Digital KYC Verification
- Customer must possess PAN (Permanent Account Number)
- The mobile number and Email Id must be registered with UIDAI against Aadhaar Data.
- Customers must have clear photocopies of PAN (photo ID proof) and Proof of Address.
- The customer must have a cancelled cheque of a personal bank account, preferably the Primary account holder.
Documents needed for completion of Digital KYC Verification
- Clear passport size photograph which can be verified with PAN or Aadhar Card to confirm the identity
- Address proof like Aadhar Card, Ration card, DL, Voter ID, passport etc.
- Color scanned image of the cancelled cheque with the name of the customer printed on it
- Legible signature of the customer scanned in the required format.
Digital KYC verification will replace the traditional KYC methods entirely in the immediate future. Hence the customers need to understand the process and implementation policies so that there is no surprise during submissions. Video KYC and e-KYC are the two prominent customer identification methods adopted by background check companies in India which will help organisations to fast track their operations and provide the best end-to-end service to customers.