How the video KYC process works to improve onboarding
Anti-money laundering (AML) requirements have had a significant impact on companies in the financial services industry. Financial crime compliance costs continue to rise as financial institutions look for efficient, cost-effective solutions to manage risk. Video KYC is one promising solution that might mitigate the negative impact of AML regulations while improving compliance.
The impact of AML and KYC regulations
The cost of compliance with regulations like KYC hit a record high during the pandemic, rising by as much as 95 percent. In addition to the costs associated with compliance, banks must contend with the additional friction that customer due diligence procedures introduced into the onboarding process.
A Thomson Reuters survey found that 89 percent of corporate customers of financial institutions had a poor KYC experience. As a result, thirteen percent of those customers changed financial institutions.
These problems are no longer confined to the financial services industry. Over the years, new industries have come under regulatory scrutiny. Now, other businesses like financial technology companies, cryptocurrency brokers, and other virtual assets dealers are also subject to KYC rules in many countries.
What is video KYC?
In response to more stringent financial regulations, technology companies have developed new offerings to enable companies to maintain compliance while still delivering an excellent customer experience. Video KYC is one of these offerings.
It’s a method of conducting customer due diligence (CDD) through a live video chat with an agent. Financial institutions and other companies that conduct CDD in this way can have their customers complete all aspects of the KYC verification process remotely.
How does video KYC work?
Other than the fact that it’s conducted virtually, the video KYC process is similar to any other interaction that would take place inside a bank.
During a live video chat, the agent asks the customer for proof of ID and other documents required by the regulations and the bank’s CDD procedure. Shortly after that, the customer receives information on whether the KYC verification was successful.
Here’s what the video KYC process looks like for customers.
1. The customer registers on the platform.
During the registration process, the customer confirms their availability for a live video chat and selects a time slot that’s convenient for them.
2. The customer receives an invite to a live video chat.
Some video KYC software allows customers to begin the verification process instantly. Other platforms send the customer an invite through email, text message, or directly in their browser. The customer clicks the link in the invite at the scheduled time to open the video chat session and begin the KYC process.
3. The agent guides the customer through the process.
During the video chat, the agent conducts an interview to authenticate the customer’s identity and asks for proof of ID and other necessary documents.
The agent performs all necessary checks, including:
- Face verification
- Checking the ID for hologram overlays and other security elements
- Assessing the validity of all supporting documents
If the agent needs the customer to complete documentation as well, they can walk the customer through online forms with co-browsing.
4. The customer receives a notification of the status of their application
Finally, the organization informs the customer whether the KYC verification was successful.
What are the benefits of video KYC?
Video KYC has a number of benefits that make the onboarding process simple for both agents and customers.
Some of the benefits of video KYC are:
- Improved customer experience. Video KYC is convenient and fast for customers, which decreases friction and improves customer satisfaction.
- Improved customer engagement. Since the process takes place during face-to-face interaction, it also allows banks to recreate the in-person experience. That way, they can begin to develop a relationship with the customer that will lead to increased customer engagement down the line.
- Decreased application abandonment. Video KYC software also decreases the number of customers who abandon their applications during KYC verification because it’s a simple process with an agent there to walk the customer through the process.
- Increased efficiency. With video KYC, the verification process can be as short as a few minutes, which makes it much less resource-intensive than other types of KYC (at a branch office of the bank, for example).
- Increased security. Video KYC adds another layer of security to the process. Agents see the customers they’re onboarding and can make sure all documents belong to the person that is creating an account. Video KYC is also more secure for customers, as they don’t need to scan or send documents, which ensures that their personal data is secure.
- It streamlines the process. Conducting the KYC verification process in-person typically adds several touchpoints to the customer journey. Video KYC decreases that number, which helps improve customer satisfaction and reduce churn.
Video KYC makes the onboarding process simple and frictionless
The ever-changing regulatory landscape is a challenge for financial institutions everywhere. But by investing in technology, the financial services industry can meet this challenge. New solutions like video KYC can ensure that regulatory compliance doesn’t hurt the customer experience.