Why is video identification necessary for banks & other financial institutions?

Published on: 19/11/2020 | Updated on: October 25, 2024

The current pandemic situation has made us realize a lot of things. One of the most important things is the realization that digitalization is important for the smooth running of the world economy.

There’s no doubt that businesses across different sectors are majorly impacted by the COVID-19 pandemic. In terms of financial stability, brick and mortars banks are highly affected by this pandemic. Why?

Because these firms rely on physical interaction with customers. And since the pandemic resulted in businesses closed and quarantine measures followed across the globe, these institutions suffered at large.

However, businesses that adopted digitalization earlier have seen a great demand for their services. For example, the fintech sector made it easier for their customers to conduct financial transactions online from the comfort of their homes.

Brick and mortar financial institutions, however, have to follow many regulatory requirements which is why it is difficult to onboard customers online.

But with the advancement in technology and higher urgency to go digital, the regulatory authorities are now allowing firms to verify the authenticity of their user online.

The newest inclusion in the suit of identity verification services is video-based customer identification. Initially, the video KYC was announced by India’s RBI but it has since been adopted by companies globally.

Even the FATF in their recent regulatory guidelines mentioned that businesses can use video ID verification for customer identification. In this article, we will discuss in detail what is video-based identification and how is it performed.

What is video identification?

Video-based identification is the process in which businesses can verify the identity of their customer on a video call instead of physically collecting the documents and verifying them using physical checks.

It provides customers with an opportunity to open a bank account or register on other platforms by simply taking a video call with the KYC expert and displaying their identity documents the same as in physical verification.

Video KYC takes off the manual verification load and gives the bank liberty to verify online and fulfill regulatory compliance at the same time reducing the operating costs.

How does video-CIP work?

Video identification is the next step in the verification process. Video KYC is a process of verifying a customer’s identity but through a video call done with a KYC expert.

This is done through artificial intelligence and human intelligence to overcheck something that might have slipped from one. Video KYC process can be done through the following steps:

• The user has to fill a registration form online through a website or the application.
• The user is then connected through a video call online with a KYC expert. This KYC expert is a human who carries out the verification process further.
• The KYC expert asks the permission of the user to record their verification process. The process will only go further if the person gives the permission otherwise it would not.
• The user is asked some questions by the KYC expert. They are also asked to move their face and perform some facial movements like smiling or blinking an eye. This process is carried out to verify the person’s face and ensure that the customer is there physically and not using an old video.
• The face of the person is verified through a liveness detection test so that no spoof attack occurs.
• The end-user is required to display their ID document in the camera. They are supposed to show the document from all the sides and even edges to make sure the ID document is authentic and no picture is being shown.
• Then this ID document is matched with the previously submitted credentials at the time of the registration. It is also matched with the face of the person to ensure the identity of the person. ID document is also verified to make sure that it has not been tampered with.
• After the process is completed the whole data is secured in the back office and whenever required it can be extracted through OCR.

Banks can enhance their verification workflow with video KYC

Video KYC can help banks in automating many manual processes and making it easier for customers to use their service leading to more customers and high brand outreach.

Banks can make their account opening process, customer onboarding, and transaction monitoring processes automated and fulfilling regulatory compliance.

Not only this video identification also reduces the costs involved in physical verification and the time taken to verify a customer. Banks don’t need to build an in-house verification department.

Reducing the verification time from hours to 3 minutes of video-based identity verification is assisting brick and mortar banks in reaching out to more customers.