How can Video KYC boost your Lending Business?
The KYC process was introduced as a measure to prevent money laundering, terrorist financing, theft and so on, but what began as an on-ground process, soon had to update itself to a digital approach, to improve in both efficiency and effectiveness.
The KYC process has seen a few digitization ups and downs over the years across geographies. Recently, as FIs all over the world were trying to find the right method of KYC that works best for them, the sudden onset of the Covid-19 pandemic forced them to reevaluate their KYC verifications to take on a more advanced digital approach.
Governing bodies all over recognised the need to update KYC methods and support was seen through regulatory reforms in many countries; From MyInfo revolutionising KYC in Singapore to the support given for V-CIP by the RBI in India, the encouragement and technology for a new video-based approach to KYC has been nothing short of revolutionary.
But what is Video-KYC and how does it fit into your lending process?
Video based KYC essentially means that people can do remote KYC from their homes or places of business (in case of Business Loans) via a video call. The verifier authenticates the documents, does a liveliness check along with establishing the location of the person – everything is done on a video call either through an assisted or self-service journey without the need for multiple checks and tedious document submission. While the Video KYC process can sound daunting, in reality, it is quite simple:
Apart from being simple, Video-KYC is also a more cost-effective and faster option for FIs. In fact, IDfy, a leading Fintech in KYC Verification, has a Video-KYC solution that reduces the cost of verification by almost 90%. The increased speed combined with accuracy could be the game-changer for onboarding customers and businesses.
The push towards digital initiatives has strengthened during the pandemic and this has impacted the financial services sector in more ways than one. Businesses everywhere experienced circumstances that drove them towards loans, especially loans for Small Medium Enterprises (SMEs). A recent report by KPMG even stated that ‘the demand for business loans and financing is immense, particularly for Small Medium Enterprises (SMEs)’ .This sudden surge in SME Lending has never been seen before and was definitely unexpected, so lenders faced a sudden demand without knowing how to capitalise on the situation.
While the idea of Video KYC was brewing before the onset of Covid-19, the opportunity to maximise its usage has finally come with the remote working norms. Faster onboarding meant faster origination and with a process as easy as Video KYC, the major problem of customer abandonment could also be reduced. It became a perfect match to accelerate SME lending through Video KYC which seemed like the most practical solution to break the onboarding bottleneck.
To emphasise the simplicity in this use case for SME Loans, these are the steps that are followed for an assisted journey with an SME Business Owner:
- Owners of SMEs first need to register on the website or mobile app of the FI (The FI usually collaborates with a Fintech through API Integrations for this process)
- The customer schedules a date and time for the onboarding process to start
- An official from the FI initiates the video KYC process by inviting the SME owner to a video call
- The customer’s National ID is then verified. This is done through checks with government databases and OCR tools.
- The official then asks the customer to display a secondary proof of identification, whose image is captured and authenticated
- The official also verifies the customer’s real-time location using geotagging software
- The official then matches the customer’s image captured on video with the image in the identity using facial matching capabilities
- The official asks the customer three random questions to ensure that it is a live interaction
- The session is concluded and the official decides whether or not to accept the customer’s video KYC information
- Finally, the official stores the recorded video interaction for future use.
With the ease in the use of Video KYC and the current opportunity that has presented itself, it is safe to say that this may be the way forward in the new normal for SME Lending. To know more about this process, watch our On Demand Webinar: Breaking the OnBoarding Bottleneck: Are you Prepared for the SME Loan Surge?