Digital KYC

Why should KYC agencies lag behind when financial institutions like banks have gone as far as to issue loans online or where employers only hire candidates after conducting video or telephone interviews? Indian financial regulatory organisations, primarily the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), have established rules for a Digital KYC process to use such services in order to keep up with the times.

What is Digital KYC?

For those who are not KYC compliant but wish to finish the KYC procedure in order to access financial services, digital KYC is simply an online KYC process. 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, will make you KYC compliant.

What are the types of Digital KYC?

Online KYC Form

Investors may finish their KYC procedure for mutual fund investments by completing an online KYC Form, as allowed by SEBI. The form must be turned in by investors to the Fund House or the appropriate intermediary. The steps to perform e-KYC authentication are shown below.

Complete the KYC Form online. Print off the form, then sign it with your wet signature. Scan the signed document and deliver it to the middleman.

Fill out the online KYC form and add your digital signature before sending it to the intermediary.

Video-based KYC

Your live photo and legitimate official papers must be taken by the middleman in accordance with RBI standards. You need a device with a camera and audio capabilities for that.

As soon as the intermediary notifies you of the specifics of your KYC process appointment make sure that the necessary documents are digitally accessible or listed on DigiLocker, the government platform for storing and verifying documents in the cloud.
Your phone or email will contain a link to a video call where an executive will carry out the KYC.
You must provide basic information, like your name, date of birth, and Aadhaar Card.
The executive will take a live snapshot of you and collect your KYC paperwork.

OTP-based KYC

You may complete the online KYC process with your Aadhaar Card for services like creating digital bank accounts and digital wallets.

When the onboarding process reaches the KYC stage, choose the appropriate option to finish the Aadhaar eKYC.
Your 12-digit Aadhaar number should be entered.
Your cellphone number associated with your Aadhaar will receive a one-time password from the Unique Identification Authority of India (UIDAI).
Complete the KYC procedure by entering the OTP.

Officially Valid Documents for Digital KYC

Identity Proof: PAN Card plus a driver’s licence, voter identification card, passport, and Aadhaar
Address Proof: most recent utility bill, phone bill, bank statement, rental agreement
Aadhaar card, Aadhaar XML
Aadhaar DigiLocker, passport copy, and ration card
Passport size
Image of a cancelled check (for investments)
Your signature in duplicate

Electronic know-your-customer, or eKYC for short, is a regulatory policy that has been designed and put into place all over the world to fight money laundering, fraud, and identity theft.

The customer’s identity must be verified using eKYC prior to completing a transaction or accessing financial services including account opening, mutual funds, business loans, etc. As time-consuming methods were replaced by digitization, eKYC was created and accepted as a suitable method of KYC verification.

A KYC form is used to gather information about the consumer and to capture copies of valid government identification documents in a database. The only form of identity verification required by the customer is his or her Aadhaar card. This eliminates the need for in-person verification and spares users from carrying around extra documents.

How is Digital KYC eligibility checked?

You must have a current Aadhaar number in order to be eligible for an eKYC. It’s because the Aadhaar number 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.

From the Unique Identification Authority of India, you can obtain an Aadhaar card (UIDAI). You’ll be given an Aadhaar card whenever government organisations have accurately authorised you.

How does Digital KYC work?

Its objective is to carry out paperless identity verification using the internet. The Aadhaar platform is used to validate a person’s identify as being genuine.
It is acceptable to use the eKYC process to verify KYC and to treat the information provided as a “Officially Valid Document.” When using the e-KYC online service, users must expressly consent to the Unique Identification Authority of India (UIDAI) retrieving their identity or address through Biometric Authentication and Aadhaar OTP authentication.

You must provide both your 12-digit Aadhaar number and a biometric, such as a fingerprint or iris scan, when utilising the biometrics approach. You only need to provide your Aadhaar number to complete an Aadhaar OTP authorisation. An OTP will then be sent to your registered mobile phone, concluding the transaction.

After that, the UIDAI electronically transmits the information, which includes a person’s name, age, gender, and photograph, to the registered organisation.
It’s crucial to remember that UIDAI data may only be accessed with the customer’s consent.

What are the verification options using Digital KYC?

Depending on the context and requirements, many forms for electronic or digital KYC might be employed. It makes use of optical character recognition (OCR), which uses biometric data to read, analyse, and verify data. There are two ways to complete digital KYC:

Video-based eKYC: During the video-based eKYC procedure, a representative will conduct a remote video call check of the customer. A physical signature written on plain white paper and the PAN and Aadhaar are immediately cross-checked and confirmed. This procedure may be finished online in 5 minutes without the customer’s personal presence.
Identity Verification: Cross-checking the customer’s image against various documents is part of image-based eKYC.

What are the advantages of Digital KYC

The eKYC technology lowers costs and increases transparency for banks and other financial institutions throughout the customer authentication process. Users may now submit crucial papers and other information from the comfort of their homes.

1. No Paper Trail:

The concerned bank’s initial prerequisite for requesting a loan or simply opening a bank account is KYC. Although it might seem like a simple procedure, the user must visit the bank in person to submit the necessary paperwork and information. For some people, gathering all the documents and properly compiling them might be challenging. This issue is resolved by eKYC by enabling online KYC document submission. The process is now completely paperless and much more effective thanks to this technique.

There is no longer a requirement for paper-based document management thanks to eKYC. A company, state, or nation may lessen their carbon footprints by going green and implementing a cloud-based internet infrastructure. Going paperless contributes to environmental preservation and lowers the cost of maintaining standard KYC compliance.

2. Consent based:

Every person who needs a service or utility must voluntarily and knowingly file for eKYC. This protects one’s right to privacy, which is a fundamental freedom protected by our constitution. Additionally, eKYC avoids the chance of losing or destroying important documents.

3. Extremely Quick:

The eKYC service is online and entirely automated. As a result, KYC information may be transmitted instantly without the need for human participation. While the eKYC procedure just needs a few minutes, the paper-bassed KYC process might take days or even weeks to complete. Online registration and identity verification are much faster than traditional KYC. eKYC is significantly quicker than visiting the branch to submit paperwork because all the formalities are completed online.

4. Transactions Or Usage Transparency:

Bank employees, private agents, unregulated sim card suppliers, and others may misuse their positions to favour known allies, kin, and friends. With eKYC, all documents and data are saved online permanently. The individual or parties involved in such transactions or service usage are responsible for any misappropriation, illicit gain, or illegal activity.