Video KYC was a distant hope just two years ago. The RBI’s approval in January 2020, quickly followed by the pandemic, accelerated its adoption in the BFSI space. Today, video KYC is more than just a platform for remotely onboarding customers in a compliant manner. It is the bedrock of the industry’s customer experience, product expansion, risk mitigation, and business growth.
From its nascent to its current state, video KYC has undergone a fascinating evolution. Each improvement was designed to make it more adaptable and increase conversions.
In this article, the two-year journey of video KYC depicts how it has aided financial inclusion, facilitated our digital lives, and shaped a new normal. It is necessary to look back in time in order to appreciate what the future has to offer.
KYC went digital, but not quite remote
Prior to 2020, several methods of digital customer identification existed, but each had its own set of drawbacks.
For instance, certain mandates in regulations for Aadhaar KYC authentication down-scaled its adoption. It could only be used to open a deposit account or issue a term loan of a balance less than Rs. 1 lakh and Rs. 60 thousand respectively. Moreover, such accounts had to be regularised by furnishing full KYC documents within a year of its opening.
On the other hand, digital KYC, as defined by the RBI, was not entirely digital in nature. It required a manual procedure of printing the digitally signed CAF (Customer Application Form) and the customer’s physical signature on the same. It also called for the customer’s physical presence at the RE’s (Regulated Entities) office or vice versa.
RBI’s landmark notification and the pandemic boost
Since the middle of 2019, there had been speculation around video KYC entering the market soon. It would meet the industry’s needs for digital interactions and verification solutions.
Things changed for the better when RBI released its ‘Amendment to Master Direction (MD) on KYC’ on 9th January 2020. The notification officially recognized another method of conducting the KYC process – Video-based Customer Identification Process (V-CIP) more commonly known as the Video KYC.
RBI’s notification on new Video KYC guidelines
Banks were at first hesitant to transition from their trusted physical fool-proof KYC verification process to a digital method. Doubts about the scalability of video KYC, its performance, ROI, and so on engulfed their minds. All of this combined to prevent them from implementing a digital verification model.
It was also a welcome relief for RE’s seeking a viable alternative to other recognized KYC solutions. Thus, it removed the drawbacks of extant KYC processes by allowing customer onboarding without their physical presence.
At the time, the nation was yet to feel the full force of the COVID-19 pandemic. The nationwide lockdown in March 2020 transformed video KYC from a curiosity to a necessity. It grew a pressing need for remote customer service, thereby hastening the adoption of video KYC. Banks and financial institutions began planning for the next phase of their digital initiatives.
The early days and the initial challenges
From bank officials to solution providers, everyone worked hard to turn the corner. It was difficult to get the new-age onboarding systems up and running in a complete pandemic-remote environment.
HDFC Bank, in collaboration with IDfy, announced the launch of its Video KYC facility on 17th September 2020. The then biggest video KYC implementation in the country. Prospective customers could open a full KYC account in just a few minutes from the comfort of their own home or office.
IDfy’s Video KYC in action at HDFC Bank
Later on in a flurry, several banks and regulated entities took to video KYC for remote, safe, and paperless customer onboarding.
Given the number of security constraints that banks and financial institutions face, several digitization challenges popped up. Banks faced technical and operational challenges such as remote employee training, running operations, testing systems for efficiency, etc. Despite the fact that smartphone penetration in India reached 54% by 2020, banks and KYC solution providers faced difficulties. The most significant barrier to bringing Indian customers onto the digital platform was their lack of trust in digital solutions. Customer drop-offs increased as a result of fluctuating networks, poor image quality, as well as limited agent training.
Soon it became imperative for regulated entities to understand the capabilities required to successfully deploy a video KYC solution.
“One of the key challenges that we faced in the initial days was how to build a video platform that is robust across varying network bandwidths. Customers who used to call from relatively poorer networks experienced frequent drops that made their entire experience sub-optimal.
We closely monitored every video call to evaluate key parameters and optimized the resiliency of the platform based on these parameters. It was a great learning experience for us and over a course of multiple iterations, we were able to build a video platform that was able to render a uniform and seamless KYC experience for all customers ranging from tier 1 to remote tier 3 cities.”
– Prakarsh Paritosh, Sr. Product Manager (Video Services), IDfy
The last year that was, in 3 major developments
Over time, banks and their solution providers worked on all of the aforementioned factors to make video-KYC the industry standard. While companies wanted to maximize conversions by adopting the digital verification method, solution providers were focused on bettering the platform to enable easy verification in minimal TAT.
A plethora of data insights gained from initial operations aided solution providers in improving their systems. A series of trials and errors paved the way for platform developers to maximize the potential presented by them.
Following changes were brought in the platforms over the course of the last year:
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Improved conversions
For the uninitiated, conversions are those leads that have completed their video KYC process and have been onboarded as customers. It might not be as obvious, but the recipe for conversion begins much before a call even begins. We can divide innovations into three logical buckets: pre-call, on-call & post-call.
1. Pre-call:
- Rule-based call allocations: It refers to connecting your customers with the appropriate agents at the right time. It matches the agent according to the customer’s cultural and linguistic familiarity, agent availability, and product/service expertise.
- Network health check: A quick network check performed at both the agent’s and the customer’s ends prevents initiating calls whose likelihood of drop-outs is already high.
- Appointment setting: It enables the customer to schedule a video call appointment in case they are waiting in line. This ensured that the customer is prepared with documents in a good network area when the process is carried out. Agents could also view scheduled calls and plan their day in order to provide a personalized experience to each customer.
2. On-call:
- Call History: Having a customer’s call history handy on their next call helps to avoid previous video KYC verification errors. This shortens the call, which improves client conversion rates.
- Document capture on low internet bandwidth: The feature allows agents to take screenshots of documents during the call without compromising image sharpness. The platform allows for the editing of screenshots as needed. As a result, agents can ensure that documents are only recaptured when absolutely necessary.
- Virtual background: A virtual video background was introduced at a time when nearly everyone worked from home. It added a polished appearance while providing a unified brand experience from the financial institutions’ end.
- Session management: The ability to allow customers to rejoin a session in case of any network disruptions was one of the most important developments of last year.
3. Post-call:
- Instrumentation: The platform’s ability to track more than 50 attributes per call provided real-time performance data. This identified the root causes of failures as well as gaps for precise improvements.
- Data analysis: Data has been a key component in the development of Video KYC features. A data-driven approach has aided in identifying the failure points that result in drop-offs during a video KYC session. As a result, followed by an iterative learning process and pattern recognition, the video KYC dashboards were made informed enough to monitor operations and improve conversions.
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How onboarding went truly remote
Once the dust settled a bit and companies got a clear understanding of video KYC and its usage, they started to recognize the benefits of the process. The video KYC innovations have paved the way for truly remote onboarding of customers across multiple industries. Onboarding has been made possible from far-flung locations ranging from Arunachal Pradesh to Andaman & Nicobar Islands.
The above heat map showcases all the calls that were made on IDfy’s video KYC platform since financial institutions first started their video KYC operations in 2020.
Even though connectivity existed in the Indian territory, bandwidth proved to be a barrier to the adoption and growth of video KYC in India’s smaller towns.
More than 40% of successful video calls use less than 80 kbps of bandwidth.
To address this massive infrastructure challenge, the updated video KYC solutions enabled calls on low bandwidth to be connected and completed. By dynamically adjusting to the network fluctuations, they ensure that the call is carried out at a minimum bandwidth requirement. This has aided in expanding to non-metro regions of the country, where network fluctuations are common.
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How the adoption widened
Initially, only a few private banks used video KYC for simple onboarding use cases. Many different types of institutions have joined the bandwagon and are stitching digital journeys over video.
RBI’s recent KYC norms have introduced new use cases that were previously untapped by V-CIP. MSME lending, corporate lending, and current account opening have all been open to the digitization and can now be completed over video.
Verification in a contactless world
V-CIP arrived at an ideal time, giving banks, NBFCs, e-wallets, and digital payment providers an opportunity to change the way KYC is done.
With the rest of the world following in the footsteps of digital transformation and redefining customer service expectations, it was time for the Indian financial sector to call the shots. The growing need to reduce manual errors, improve customer service quality and lower costs has resulted in significant progress in the e-KYC industry.
It has led to substantial financial inclusion whilst also easing the verification process for a wide range of use cases. As customers and prospects continue to seek convenience, video KYC has evolved into a way of life – the new normal.
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