Digital KYC Explained: Types, Benefits and Challenges

Digital KYC is a process that's becoming increasingly important in today's digital age. It's a way for businesses to verify the identity of their customers online.

There are two main types of digital KYC: Know Your Customer (KYC) and Anti-Money Laundering (AML). These processes are designed to prevent financial crimes and ensure that businesses are compliant with regulations.

Digital KYC can be performed through various means, including video interviews, document uploads, and biometric verification. This makes it more convenient for customers to complete the process, reducing the risk of abandonment.

The benefits of digital KYC include reduced processing times, lower costs, and improved customer experience. It also helps businesses to better understand their customers and tailor their services accordingly.

Digital KYC is an online method of verifying people's identity, enabling them to access any financial instrument in the market.

The process involves customers sharing their live photo or video and officially valid documents with the company's representative, which are then verified against official records.

Customers can become KYC compliant by filling out an online KYC form or going through the Video-based Customer Identification Process (V-CIP), both of which are approved by the RBI and SEBI.

Digital KYC solutions enable identity verification through digital means such as OTP-based KYC, video-based KYC, or online KYC forms, saving time and reducing friction in customer onboarding.

Unlike traditional KYC, which requires physical paperwork and in-person verification, Digital KYC allows businesses to quickly authenticate users without face-to-face interaction.

With digital KYC, customers can access financial services without the need for physical paperwork, making the process more accessible and convenient.

There are several types of Digital KYC, each designed to provide convenience while ensuring the highest level of security and compliance. Online KYC Forms are a convenient option, allowing customers to fill out a form and submit it electronically.

To complete an online KYC form, customers can either print and sign it, or add a digital signature. This makes the process more convenient and entirely digital.

Video-based KYC is another authentic and legally endorsed method, primarily used for opening new bank accounts. It involves a comprehensive audio-visual interaction, where a registered officer captures the customer's live photos, videos, and valid documents.

Here are the key steps involved in video-based KYC:

OTP-based KYC is commonly employed for opening digital wallets or bank accounts, using an OTP dispatched to the mobile number registered with the Aadhaar card.

Digital KYC is a convenient and secure way to verify customer identities. It's conducted through various methods, each designed to provide ease while ensuring the highest level of security and compliance.

There are three primary types of Digital KYC: Online KYC Forms, Video-based KYC, and OTP-based KYC. Each method has its own advantages, making it suitable for different business and customer needs.

Online KYC Forms are a straightforward way to gather information from customers. Video-based KYC involves a face-to-face verification process, making it a more secure option. OTP-based KYC uses one-time passwords to authenticate customers, adding an extra layer of security.

To verify customer identities, Digital KYC products use AI, ML, and deep search algorithms. These algorithms ensure the fastest onboarding process for customers, reducing operational costs and allowing businesses to scale up quickly.

Some Digital KYC products, like AuthBridge, use OCR-enabled technology to verify Proof of Identity (POI) and Proof of Address (POA) documents. This technology automatically extracts necessary details from documents, making the verification process faster and more efficient.

The following documents are officially valid for Digital KYC:

These documents are essential for completing a Digital KYC process, ensuring that customer identities are verified accurately and securely.

Online KYC forms are a convenient way to complete the KYC process remotely. They allow customers to submit their details and upload supporting documents, such as a PAN card or Aadhaar card, through a secure online portal.

The online KYC form is particularly popular for its ease of use and quick processing times. This makes it an efficient way to complete remote KYC without the need for face-to-face interactions.

There are two ways to append a signature to an online KYC form. You can either print the form, sign it, and send it to the physical address of the concerned organization, or add a digital signature to the online form and submit it electronically.

Here are the two methods of appending a signature to an online KYC form:

Video-based KYC is another type of online KYC verification. It involves a comprehensive audio-visual interaction, where a registered officer captures the live photos, videos, and valid documents of the customer.

The video KYC process typically involves four steps. The customer initiates the process by signing up for a service and completing the video KYC verification. They then receive a link via text or email, which they click to trigger the video KYC session. An executive from the concerned organization conducts the video KYC, capturing the requisite details and employing geotagging to ascertain the customer's location within India.

The digital KYC process is designed to be convenient and secure. It can be conducted through various methods, including online KYC forms, video-based KYC, and OTP-based KYC.

Online KYC forms are a popular choice, allowing customers to complete the entire KYC process remotely. This method is particularly efficient, with quick processing times and no need for face-to-face interactions.

The digital KYC process involves several steps, including mobile number verification with OTP and consent-based verification, selfie capture and liveness check, and successful customer identification and KYC acceptance/rejection.

Here are the types of digital KYC verification:

To start the Digital KYC eligibility check, you must have a current Aadhaar number. This is because the Aadhaar number serves as the basis for client registration in India.

In order to be eligible for an eKYC, you'll need to have a current Aadhaar card. Any government-run service or benefit cannot be applied for without one.

The eligibility check process is a crucial step in the Digital KYC process, and it's what determines whether you can proceed with the eKYC.

Digital KYC Process works in several ways, but the primary method involves using the Aadhaar platform to validate a person's identity. This process is paperless and uses the internet to ensure maximum security and compliance.

To begin with, you'll need a current Aadhaar number, which serves as the basis for client registration in India. Any government-run service or benefit cannot be applied for unless you have a current Aadhaar card.

The Aadhaar number is used to retrieve your identity or address through Biometric Authentication and Aadhaar OTP authentication. This involves providing both your 12-digit Aadhaar number and a biometric, such as a fingerprint or iris scan.

Alternatively, you can use an OTP-based KYC, where an OTP (One-Time Password) is dispatched to the mobile number linked with the Aadhaar. This OTP is then entered to complete the KYC process.

Here's a breakdown of the Digital KYC process:

Once the authentication is complete, the UIDAI electronically transmits the information, including the person's name, age, gender, and photograph, to the registered organization. This information is treated as an "Officially Valid Document" and is used for KYC verification.

The entire process is contactless, making it easy for customers to complete the KYC process remotely. This is especially helpful in rural areas where access to banks and financial institutions is relatively lower than in urban areas.

Digital KYC methods have made it easier to verify identities remotely. There are several methods to choose from, including OTP-based KYC, video-based KYC, and mobile KYC.

OTP-based KYC is a widely used method, particularly for services like opening digital wallets or activating financial accounts. It leverages the Aadhaar eKYC system, allowing customers to verify their identity using their registered mobile number.

To complete OTP-based KYC, customers typically enter their primary details, add their Aadhaar number, and receive an OTP on their mobile number. They then enter the OTP to complete the KYC process.

Video-based KYC is another highly secure and interactive method, approved by regulatory bodies like the Reserve Bank of India (RBI). This method involves a live video session between the customer and a representative from the service provider to complete the KYC requirements.

Mobile KYC offers convenience to customers, particularly in regions with limited access to physical branches. Customers can complete the entire KYC process using their mobile devices, including submitting documents, engaging in video-based KYC, and receiving OTPs for verification.

OTP-Based KYC is a widely used digital verification method, particularly for services like opening digital wallets or activating financial accounts. It leverages the Aadhaar eKYC system, allowing customers to verify their identity using their registered mobile number.

This method is known for its simplicity and speed, making it an ideal solution for low-risk financial services such as prepaid wallets or basic savings accounts. The process is straightforward and efficient, saving customers time and effort.

To complete OTP-Based KYC, customers typically enter their primary details and reach the Aadhaar e-KYC tab. They are then prompted to add their Aadhaar number, after which they receive an OTP on the mobile linked with the Aadhaar number.

The OTP is usually sent to the mobile number registered with the Aadhaar card. Customers then enter the OTP, and the KYC process is completed. This method is becoming increasingly popular due to its convenience and speed.

Here are the typical steps involved in OTP-Based KYC:

With OTP-Based KYC, customers can complete the entire KYC process using their mobile devices, including submitting documents and receiving OTPs for verification. This method offers convenience to customers, particularly in regions with limited access to physical branches.

Video-Based KYC is a convenient and secure way to complete the Know Your Customer (KYC) process. It involves a live video session between the customer and a representative from the service provider.

The Reserve Bank of India (RBI) has approved this method, making it a highly secure and interactive way to conduct KYC verification. In fact, it's the most authentic and legalized method of KYC, especially for opening a new bank account.

To complete the video KYC process, you'll need a device with a camera and audio capabilities. The representative will guide you through the process, which typically involves providing basic information like your name, date of birth, and Aadhaar Card.

Here's a step-by-step guide to the video KYC process:

Mobile devices play a crucial role in video KYC, allowing customers to complete the entire process using their smartphones. This convenience is especially beneficial in regions with limited access to physical branches.

To ensure the authenticity of the video KYC process, service providers use AI-powered image recognition and liveness detection technologies. These technologies use biometric anti-spoof algorithms to test the genuineness of the image taken and match it with valid ID proof.

Document verification is a crucial step in the digital KYC process. It ensures that the customer's identity and address are verified accurately.

To verify identity, you'll need to provide a valid government-issued document. For example, you can use your PAN Card, driver's licence, voter identification card, passport, or Aadhaar card.

Aadhaar card is the only form of identity verification required by the customer. You can obtain an Aadhaar card from the Unique Identification Authority of India (UIDAI).

Here's a list of acceptable documents for identity and address proof:

Document verification can be done using OCR-enabled technology, which automatically extracts necessary details from the documents. This makes the process faster and more efficient.