In a recent article in the Economic Times - Prime, Wriju Ray - co-founder and CBO at IDfy - said that the customer identification and authentication processes should be seen separately. Video KYC, he says, can solve this problem.
"The requesting entity can download the video. But how would the entity authenticate whether this is the same person transacting now? So, it could take the video and match it with the documents available with the Central KYC Repository (CKYCR)," Wriju adds.
The article, published in ET Prime on April 30, 2019, talks about the pipe dream of having a single KYC for all our bank accounts and payment apps. Something that could make life easier for millions of customers and their banking service providers.
Central KYC Registry (CKYCR)
The CKYCR went live in 2016 and was meant to put an end to the multiple submissions of KYC documents and start a one-time submission to a central agency. But it has not lived up to that promise. Primarily due to a an unfriendly cost structure and gaps in its foundational promise.
"It doesn't make sense for us to spend money on a physical KYC and then spend more to convert that data into CKYC format," a senior bank executive told ET Prime.
Not just that, banks need to spend Rs 0.80 for submitting the documents. Further money needs to be spent to download or update the KYC records.
"Charging the submitter doesn't make sense at all. Regulators should charge the entities downloading and using the KYC records," says Naveen Surya, Chairman of IAMAI's Fintech Convergence Council.
The CKYCR also runs into accountability issues regarding incorrect data. Is the submitter at fault or the one using that data?
As Wriju's statements at the start of this post point out, we believe in Video KYC. It can solve most of these problems and herald us into a truly digital age of instant KYC.
Bankbazaar CEO Adhil Shetty agrees. He is quoted in the article saying that unlike physical KYC, video KYC has actual proof of the KYC with the customer showing their documents and the entire thing being recorded.
Alternatives to CKYC
Option #1: Credit bureau-like model for KYC sharing
It's a good idea but unlikely to work for a couple of reasons. One, regulators don't trust banks' data. Two, without a legal framework, banks would not like to share their data.
Wriju points out to the third and, probably, the most important issue. Data privacy. Interoperability, he says, cannot be talked about in the absence of data privacy laws.
"To share data between entities, there needs to be an architecture that takes care of consent, privacy, and auditability," he says to ET Prime. "Currently that architecture is missing," he adds.
Option #2: An UPI-like Architecture
Can the National Payments Corporation of India (NPCI) come up with an API or tech layer for Fintechs to fetch KYC data from Banks?
While the Fintechs might want this, this requires a big change that regulators are resistant to, according to ET Money CEO Mukesh Kalra.
A top payments official adds that regulators do not believe that payment companies can do the KYC job.
The rigmarole of multiple KYC submissions, reminders, suspensions of services due to incomplete KYCs will be a reality in the lives of millions of Indian for the foreseeable future.
Far too many entities with sometimes conflicting interests need to come together to build a centralised KYC system. This, unfortunately, is too far-fetched a dream in the current scheme of things.
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