Know-your-customer (KYC) processes are crucial for businesses to mitigate risks associated with financial crimes, such as money laundering and terrorist financing. In the digital age, the rise of remote onboarding and online transactions has necessitated the development of innovative KYC methods. Two such methods that have gained prominence are digital KYC (e-KYC) and video KYC (v-KYC).
This article provides an in-depth comparison between digital KYC and video KYC, highlighting their distinct features, advantages, disadvantages, and best practices. By understanding the differences between these two KYC methods, businesses can make informed decisions to enhance their due diligence processes.
Digital KYC refers to the process of verifying a customer's identity and collecting their personal data through electronic channels without requiring physical interaction. It typically involves using facial recognition, document verification, and data extraction techniques to confirm a customer's identity in real-time.
Key Features:
Advantages:
Video KYC is a KYC method that involves a live video call between the customer and a certified agent. The agent verifies the customer's identity by interviewing them and checking their government-issued documents.
Key Features:
Advantages:
** | Feature | Digital KYC (e-KYC) | Video KYC (v-KYC) | ** |
---|---|---|---|---|
Automation | Fully automated | Live interaction | ||
Verification | Biometric verification, document verification | Live interview, document verification | ||
Data collection | Collects personal data remotely | May collect additional data during the call | ||
Convenience | Remote and easy to complete | Requires live interaction | ||
Cost | Lower operating costs | Higher operating costs | ||
Security | Advanced technologies for fraud prevention | Enhanced security due to human interaction | ||
Compliance | Suitable for low-risk industries | Suitable for high-risk or regulated industries |
The choice between digital KYC and video KYC depends on various factors such as the industry, risk appetite, regulatory requirements, and customer expectations.
Digital KYC Best Practices:
Video KYC Best Practices:
Digital KYC:
Pros:
Cons:
Video KYC:
Pros:
Cons:
Effectively implementing digital KYC or video KYC is crucial for businesses to enhance their due diligence processes and mitigate the risk of financial crimes. By understanding the differences between these two methods, choosing the appropriate approach, and implementing best practices, businesses can ensure a secure and compliant onboarding process that meets their specific requirements.
Story 1:
A customer tried to verify their identity using e-KYC, but their facial recognition scan failed multiple times. It turned out that their pet parrot had been perched on their shoulder during the scan, imitating their movements and confusing the system.
Lesson: Ensure that customers are in a quiet and well-lit environment during e-KYC for optimal results.
Story 2:
During a video KYC call, the agent asked the customer to hold up their government-issued ID. The customer, in a moment of confusion, held up a picture of their dog instead.
Lesson: Provide clear instructions and ensure that customers understand the requirements of the KYC process.
Story 3:
A customer tried to establish a new bank account using v-KYC. However, the agent noticed that the customer's background appeared to be a stage in a theater. It turned out that the customer was participating in a play and had borrowed the theater's stage for the KYC call.
Lesson: Ensure that agents are trained to identify potential inconsistencies and request additional verification when necessary.
Table 1: Global KYC Market Size and Forecast
Year | Market Size (USD Billion) | Forecast (USD Billion) |
---|---|---|
2022 | 12.3 | 22.9 |
2027 | 26.5 | 45.8 |
Source: Reportlinker
Table 2: Cost Comparison of Digital KYC and Video KYC
KYC Method | One-off Cost | Ongoing Cost |
---|---|---|
Digital KYC | $5-$20 per verification | $0.5-$2 per verification |
Video KYC | $20-$50 per verification | $5-$10 per verification |
Source: Gartner
Table 3: Features Comparison of Digital KYC and Video KYC
Feature | Digital KYC | Video KYC |
---|---|---|
Automation | High | Low |
Verification | Remote, automated | Live, |
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