KYC is a customer onboarding platform that follows a series of processes to use financial instruments to simplify the verification process. The process of traditional KYC has even affected financial institutions, giving them a rise to know about their customers. But, there have also been some recent developments, especially after the pandemic of COVID-19 that has advanced this process.
Digital KYC is a much easier and faster method to help financial institutions know their customers better. This has been made mandatory by the RBI for the authentication of the customer’s financial data. This has even helped to gain insight into why KYC is important.
What makes digital KYC better than traditional KYC?
For a customer onboarding KYC, customers will always have to visit branches of the required financial service provider. Then, they will provide an application that has to be submitted to the branch along with a list of other documents. The validation process will also happen then and there due to the physical presence of both the officer and the customer.
But, this process also has certain drawbacks. Let’s take a look at them.
Time-consuming: Compared to Digital KYC, traditional KYC is much more time-consuming. It requires the time of individual customers to visit branches and stay there for as long as the verification continues. In case, there is any kind of incomplete documents provided, the customer may have to go back and forth to fulfil the requirement.
This is not the case with Digital KYC. The video KYC is a much faster process. It uses machine learning and its algorithms to verify documents along with font size, word spacing, identifying images, etc.
Difficulty in business expansion: When somebody wants to expand his/her business, the KYC acts as a customer onboarding platform and helps in reaching the maximum number of customers in a minimum time. But, these new customers will always be dependent on the branch officer of a financial institution and its delayed process.
However, on the other hand, the video KYC takes up the system of Anti-Money Laundering (AML) monitoring in order to reduce fraudulent activities. This method is very beneficial, especially for companies trying to expand their business. The financial behaviour of the individual trying to make connections with the business will also be scanned of his/her transaction history and all kinds of financial behaviour. Even when the individual tries to make a wrong move, the fraudulent actions will be caught right there.
Not paperless: The customer onboarding KYC is sure to involve papers while filling in applications or submitting documents. Even when the documents are no longer required, they still hold a physical place in the corner of the rack.
But, for a digital KYC, such problems can be easily ignored. There is no need to be physically present to submit documents or sign them. The documents can be electronically signed. Even, all the documents can be verified on the video itself.
The introduction of video KYC has completely transformed the KYC methods. It has made customer onboarding a lot faster and more reliable. The hassle of being physically present in a branch of a financial institution throughout the verification process has been replaced by smart verification via video KYC. Now, the customer only has to video himself/herself with one of the important documents that are approved by the government. These documents may include identity proof like an Aadhaar card or PAN card and a linked mobile number. It is a crucial platform due to the increased safety protocols, especially for people living in remote areas who are unable to visit branches that often.
