Indian FinTechs ready with Video-KYC solution, regulations unlikely to be out soon

Image result for video kyc

Idfy’s Video-KYC illustration

Even as the Indian financial regulators are yet to come out with their respective guidelines for video KYC (know-your-customer), the consumer-facing FinTech startups seem to be ready with the solutions. 

According to sources, India’s banking regulator Reserve Bank of India (RBI), capital markets regulator SEBI, and insurance regulator IRDAI were likely to come out with guidelines for the video-KYC by in August this year. However, it is unlikely that the guidelines would be released anytime soon, sources added. 

“All the regulators have to be on the same page before releasing the guidelines. We haven’t heard anything from the regulators yet. However, most of the players are well equipped to provide video-KYC. We are waiting for the guidelines,” said a digital KYC solution provider on condition of anonymity.  There are over half a dozen players in the country, including Idfy, Syntizen and Veri5Digital, that are providing digital identification solutions or building identity-as-a-service products. 

Earlier this year, a committee set up by the RBI recommended for the use of Video-KYC (via actual video calls) by replacing the current KYC and Aadhaar KYC norms for physical verification of customers. Aadhaar is a 12-digital unique identification number assigned to all Indian citizens by the Government. 

For over a year now, the FinTechs, NBFCs, banks and other financial institutions have been facing hurdles with regards to customer KYC following a diktat by India’s Supreme Court. The apex court had scrapped a portion of the Aadhaar Act that enabled private companies to use Aadhaar for establishing the identity of an individual. Terming it “unconstitutional”, the court said that private companies cannot use Aadhaar for KYC at all but can do so if an individual wants to share it voluntarily.

The move was termed “draconian” by companies, who had been developing technologies to acquire customers based on an earlier direction from the RBI. 

Siddharth Kukatlapalli, the co-founder of Syntizen, told IBS Intelligence that Video-KYC is effective as it can help reduce customer acquisition costs drastically. It would also do away with the requirement for any hardware in the process. Hyderabad-based Syntizen has developed technology to verify customer identities by using a mobile phone camera.

He further added that many of Syntizen’s clients are ready with the solution and would start using it once the final regulations and guidelines are out. 

Video-KYC is beneficial for FinTech startups running on a shoe-string budget, NBFCs with a small client base, and for companies that are unlikely to get an Aadhaar-KYC license from UIDAI.   

Saru Tumuluri, CEO of Khosla Labs that owns Veri5Digital, said, “Video-based KYC is witnessing a large-scale adoption. It is faster, hassle-free and eliminates the requirement of expensive biometric devices.”

Besides, the customers can complete their video KYC process using their mobile phones. “With our extensive coverage of officially verified documents (OVDs), we can perform the video-KYC for any consumer in India. At a time when the industry is undergoing a complete transformation, video-based verification is the need of the hour,” she added.

Anuj Kacker, Co-founder of MoneyTap, said that the Video-KYC customers to complete KYC authentication digitally, within minutes and reduces the approval time by at least 50%. It further saves on operations costs.

Meanwhile, the Indian FinTech community is still debating on the challenges around eKYC and awaiting clarity from the regulators’ take on the implementation of eKYC. 

Aditya Kumar, Founder & CEO, Qbera.com said that despite all the challenges, eKYC tie-ups are in progress and will depend on the final shape and size of the regulation. “We will likely tie-up with one of the nimble startup vendors that are offering these services once there is clarity on the regulation,” he added. 

Harsh Pokharna, Co-Founder & CEO, OkCredit said that digital KYC has multiple positive impacts on the customer onboarding process.

Primarily, it decreases the Turnaround Time (TAT) in it, thereby ensuring that any business does not lose any customers due to the typical delays. It further reduces the cost of customer onboarding with e-KYC adding a mere INR 15 to the operational expense as compared to INR 100 via the physical route, he said. 

Besides, since Aadhaar infrastructure is powered by and secured through biometrics, it directly adds to the authenticity of the e-KYC process as well as that of a customer’s/user’s credentials. It also enhances the overall visibility for a business with the superior, first-hand dataset and enables enterprises to eliminate several bottlenecks from the customer onboarding process.

Lalit Keshre, Co-founder and CEO, Groww said, “The new generation of investors expects the entire experience to be paperless and instant. The user experience is frictionless and shortens the entire user journey, as people can take pictures of their documents and complete IPV (in-person verification) through live video.”

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