The lengthy and complicated manual KYC procedure has declined rapidly. After the covid-19 pandemic, all businesses are focusing on digitization. Numerous business sectors are now choosing online video verification, which is more authentic and efficient.
Financial institutes such as banks and others are embracing this change in the KYC process more rigorously and urgently. These all are more prone to scammers and vulnerable to cybersecurity threats. The regulatory landscape always tries to improve the KYC regulation concerning digital change to protect financial sectors. Advance regulation is needed to combat the increasing financial fraud, ID theft, and other financial crimes.
This blog discusses the latest video-based KYC and the difference between online video verification and the traditional KYC procedure.
Why is KYC Important in Financial Businesses?
In simple words, KYC means to know your customer by identifying the individual’s identity. Businesses and financial institutes follow the KYC verification process to comply with regulatory laws. Companies have various procedures to verify identity depending on the jurisdiction and policies. The KYC process is essential for financial sectors to onboard new customers and develop new business relationships.
KYC is vital in protecting companies from financial fraud and regulatory fines. According to United Nations, 2-5% of the world GDP is annually laundered, used in drug trafficking, and supports terrorism or other shady activities. KYC compliance helps businesses mitigate the risk of money laundering. After verifying customers’ identities and sources of income, it is easy for the financial sectors to monitor their activity. The KYC process gives companies the upper hand to report suspicious activity to authorities.
How Traditional KYC Works
In the manual KYC verification, customers have to provide their personal information, such as name, address, date of birth, and ID number. After registering, they must submit identification documents verifying all provided information and uncover the individual’s identity. These papers can be driver’s licenses, passports, or national IDs.
In the traditional verification procedure, the customer must physically submit these documents. Many companies make face-to-face verification compulsory, where customers reach the office and meet business representatives. Companies verify identities by comparing their face to the photo of provided documents.
Verifying documents is complicated and time-consuming in manual KYC verification. Businesses need trained resources that ensure the authentication of documents. They cross-check the information provided by customers and details on paper. Employees monitor visible security features like holograms, signatures, fonts, etc., to confirm documents are not counterfeit or tampered.
Drawbacks of Traditional KYC Verification
Manual KYC verification is time-consuming and done by humans, so it is error-prone. It can lead to the late onboarding of customers, which overall damages the reputation and affects customer satisfaction. A study conducted by LexisNexis Risk Solutions found that businesses spend an average of $16.5 million annually on AML compliance, including KYC processes.
Manual KYC requires trained and significant employers to conduct documents and face-to-face verification. This highlights the major financial investment required to combat financial crimes.
How Online Video Verification Works
The automated video KYC verification process is simple and cost-efficient compared to the manual method. Video-based KYC means to video call for the face-to-face verification procedure. The business agent conducts a video call to the customer and asks questions according to policy. Customers submit their documents digitally for online video verification to confirm their identity.
Video KYC solution merely does the same as a manual procedure, but businesses can conduct all these procedures remotely. Customers don’t need to come into the office and not wait in bank lines. Video KYC vendors use robust AI technology to verify the document’s authenticity and for facial recognition, which makes it less error-prone. Online video verification works on machine learning algorithms that update themselves from learning mistakes. The proactive video KYC process is more authentic and quicker.
Advantages of Online Video Verification
Live video-based KYC is a speedy and safe method to onboard customers remotely. Online video verification enhances the customer experience, and the digital KYC compliance method builds trust. Video KYC vendors help businesses identify customers and adhere to government regulations.
Efficient video KYC solutions are a cost-friendly and foolproof shield for business security. This is also an electronic record of AML and KYC compliance for a company which they can use to defend in regulatory cases. Advanced technology bolsters the security that also protects the reputation of a company.
Conclusion of Online Video Verification
Remote video KYC verification covers a large number of industries. Many companies are interested in digital identity authentication because of its efficiency and cost-effectiveness. Robust and machine learning are alluring for organizations that want to fight against the growing threat of financial fraud. It also confirms the speedy and smooth onboarding process to enhance customer experience.