Innovative financial services and faster payment options – ACH, digital wallets, peer-to-peer fund transfers, cryptocurrencies – are now available online that afford the customers the convenience of transacting instantly, regardless of their locations. With online transactions rising, reviewing increasing volumes of customer data manually is an onerous task. The recent notification of the Reserve Bank of India (RBI) allowing financial institutions (FIs) in India to conduct video-based KYC of the customers will lessen this burden and speed up onboarding of the remote customers.
In the last post, we discussed the process defined by the RBI for Video Customer Identification Process and how it will help FIs and customers – especially those located in remote areas. In this post, we will look at some of the intrinsic limitations that come with video-based authentication.
Adequate Staff to Take Customer Calls
Live video conversation, as is also mandated by the RBI, is a better tool for customer identity verification when compared with a recorded video. This is because, in the age of deepfakes, it is not difficult for cyber criminals to fake customer videos stolen from social media platforms. However, the limitation of a live video call is that it will require a representative from a bank (or the regulated entity initiating the call) to be present for the call. It is likely that customers may choose a time convenient to them which may be outside of the normal working hours of the bank. In such a case, the bank will need adequate specialist staff round the clock to attend to customer calls.
Increased Costs and Delay in Verification
The bank may choose to deploy support staff to capture data, which the specialists can review when they are available. However, this will delay the verification process, which can cause customers to switch over to a competitor who can offer a faster onboarding experience.
In addition, these staff will need appropriate training to handle live calls and capture/verify the required data. This will translate into additional costs for the bank.
Risk of the System being Exploited
To circumvent the shortage of staff, should the bank choose to automate its representative’s responses, it will become easier for cyber criminals to trick and exploit the system. If the bank chooses to define the call-in times for customers, it will only introduce friction and impact customer experience.
High Quality Videos and Internet Connection
Apart from manpower requirements and the risk of potential exposure of the system to cyber criminals, live video requires a stable internet connection at both ends. Also, the recorded video that the customers’ upload must be clear and high quality – adequate enough to let the representative clearly view the facial details.
Human Error and Biases
When a human makes a judgment there is a probability of bias and errors creeping in. Using a machine learning-powered software can help eliminate human errors, but the software must itself be unbiased.
Figure Out the Best Way Forward
Financial institutions including banks and digital-age fintechs are obliged to follow the highest security standards in order to ensure they allow only legitimate people to open new accounts and that they do not facilitate any illegal activity.
Video-based KYC is definitely a welcome step in the digital-first economy. However, FIs will need to grapple with the limitations and figure out if they need to pair it with other software to get the best out of it.
The article has been written by Neetu Katyal, Content and Marketing Consultant
She can be reached on LinkedIn.