Video KYC stalled in India as regulators fail to release guidelines
FinTech startups in India have finalized video-KYC (know your customer) solutions for customer identity verification to prevent money laundering, financing terrorism and financial crimes, in spite of Indian financial regulators who failed to come up with any guidelines, writes IBS Intelligence. Sources doubt the Reserve Bank of India (RBI), capital markets regulator SEBI, and insurance regulator IRDAI will deliver guidelines in the near future.
Currently, there are more than six companies in India developing biometric identity verification solutions or identity-as-a-service products, such as Idfy, Syntizen, and Veri5Digital.
“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.
In 2018, the Reserve Bank of India (RBI) considered using live video and other new electronic modes to authenticate customer identity for payments. Digital authentication would be conducted using XML to extract limited customer information from the Aadhaar database, which would not include biometrics. At the time, the regulator decided to postpone updating its KYC guidelines until changes were made to the Prevention of Money Laundering Act. This year, it was recommended to replace current KYC and Aadhaar KYC physical verification benchmark with video-KYC.
A ruling by India’s Supreme Court that no longer allows private companies to use Aadhaar to identify customers is allegedly impeding customer KYC. The Supreme Court described the use of Aadhaar for KYC is “unconstitutional,” yet ok to use if consent is given by an individual.
According to Siddharth Kukatlapalli, the co-founder of Syntizen, video-KYC such as technology integrated with a mobile phone camera can significantly cut down customer acquisition costs. The solution is ready for immediate deployment once regulations are established.
“Video-based KYC is witnessing a large-scale adoption. It is faster, hassle-free and eliminates the requirement of expensive biometric devices,” said Saru Tumuluri, CEO of Khosla Labs and Veri5Digital. “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,” he added.
MoneyTap co-founder Anuj Kacker claims the video-KYC also saves on operations costs by reducing approval time to half.
The FinTech ecosystem is concerned about eKYC implementation and lack of regulatory clarity because eKYC enhances customer onboarding processes and decreases the Turnaround Time, pointed out Harsh Pokharna, Co-Founder & CEO at OkCredit.
Biometric security integrated in Aadhaar infrastructure augments the accuracy of the e-KYC process and delivers more visibility and efficiency in customer onboarding processes.
Aadhaar | authentication | biometrics | facial recognition | financial services | fintech | identity verification | KYC | video