Exploring the Benefits of Video KYC for Financial Institutions

Adekunle Oludele
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Jun 16, 2023

Financial institutions are subjected to some of the strictest regulations due to the nature of their operations. Since they handle confidential client information, such as transactional data, they must ensure maximum compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) laws. This is done to curb financial crimes such as financing terrorism and corruption. In this digital transformation age, software solutions offer KYC-compliant verification tools. One such tool is “Video KYC”, which refers to online video identification. This process is used during customer onboarding to ensure maximum accuracy and prevent identity theft. This article explores the advantages of video KYC in financial institutions.

How to Perform Video KYC?

Although the exact procedure can vary depending on video KYC vendors, here’s a snapshot of the steps of modern video KYC processes:

In the first step, the customer signs up on the online portal of financial institutions. Once an account is created, they are prompted to get on a call with a KYC expert for video chat ID verification.
During the call, the expert asks questions from the customers. This step includes facial recognition to perform liveness checks.
After the liveness check, customers are asked to hold their documents before the camera. This step is referred to as document verification.
In the last step of video KYC, face verification is performed by matching the customer’s face with the picture on the documents.

Benefits of Video KYC

From the regulators’ point of view, video KYC is an important step towards curbing financial crimes. For companies and banks, video KYC allows streamlined customer onboarding and enhanced security of customer data. Here are some benefits of using this process in financial institutions:

Prevent Spoofing and Deep Fakes

Know your customer is an essential step for FIs. However, hackers have devised innovative methods to fool standard verification checks. For instance, spoofing and using synthetic identities are two methods hackers use for this purpose. During spoofing attacks, illicit actors impersonate legitimate customers to access accounts and steal sensitive information. Liveness checks during customer onboarding video KYC prevent this from happening. Similarly, synthetic identities and deep fakes pose a significant challenge to banks. There can be grave consequences for customers and banking institutions if such activities are not contained. Although document and background verification plays a crucial role in KYC, video KYC has become necessary to combat these modern attacks.

Stay Fully Compliant with KYC Rules

Not so long ago, KYC checks were conducted differently. Background checks, which included document verification, were processed online. However, since there was no adequate method of liveness checks, customers had to come in to complete the verification physically. This process does not coincide with the digital transformation plan of the financial industry. Video KYC is the only viable solution to ensure full compliance with KYC laws during online verification. Therefore, video KYC is not just an additional gimmick to attract customers. Instead, it is a highly efficient and practical approach to ensure regulation compliance. Moreover, it also safeguards FIs from legal repercussions.

Enhance Customer Experience

As far as modern customers are concerned, they expect digital banking to be truly digital. It will always be inconvenient if the customers are asked for physical checks. Similarly, advanced hackers can exploit financial systems using deep fakes and forged documents. A constant fear of identity theft and financial loss can negatively impact the customer base of a bank. Thanks to KYC video verified customer onboarding, customers can expect a streamlined experience. Customers can easily open an account from the convenience of their couches.

Positive Impact on Business Bottom-Line

KYC and AML compliance is not an option for financial institutes. Instead, it is a mandatory process that can be cost and resource-intensive for a company. For financial institutions, it comes down to two options. Firstly, they can use a manual workforce to conduct these processes and lose precious resources. The second option is to use an online video KYC process that significantly reduces logistic expenditures while increasing verification accuracy. Therefore, since there is no circumventing KYC processes, the most viable option is to invest in a cost-effective digital solution. It reduces costs and allows the banks to invest in other business avenues.

Summing Up

Both physical and pre-recorded video KYC processes encounter similar obstacles. To implement it successfully, FIs must implement live video KYC solutions that utilize advanced document verification and facial recognition technologies. Since modern attackers have devised new methods for exploiting financial systems, banks need to revitalize their security measures. AI-powered video KYC solutions start the process with liveness checks to determine if the customer is physically present during onboarding. Moreover, facial recognition provides another layer of security so the customers can be confident in the institution’s efforts.