Know Your Customer — the processes a business completes to verify its customers’ identities and understand their risk profiles — has never been static. Ever since its inception, KYC has evolved to meet customers where they are, take advantage of new technologies, and better respond to fraudsters’ tactics.
Case in point: When customers began to demand an online process for opening an account with their bank, those banks responded by bringing the KYC process online and, eventually, to mobile phones, facilitated partlyby technologies that allowed for digital uploads of government IDs and other documents. When bad actors developed strategies to get around these defenses, the banks responded by deploying selfie verification as a form of liveness detection that could mitigate instances of spoofing and other forms of fraud. Additional examples abound.
Today, one of the next evolutions for digital KYC involves incorporating video into the process.
Below, we define video KYC, take a look at the different forms it can take, and walk through how it works. We also explain the benefits that video KYC offers businesses and answer other common questions that can help you decide whether video deserves a place in your KYC toolkit.
What is video KYC?
Video KYC (vKYC) refers to any Know Your Customer process that leverages video in some capability. It’s also sometimes known as video verification, video identification, or video-based customer identification process (V-CIP).
The exact form that video KYC takes will depend on how it is deployed within a business’s KYC flow. Some organizations, for example, may choose to conduct video calls between their users and live KYC agents, while others may opt to automatically capture video at key moments of the KYC flow to detect fraud signals.
We explore both of these strategies in greater detail below.
How does the video KYC process work?
Businesses can leverage video in their KYC processes in a number of different ways. Two of the most common strategies include 1) conducting a video interview during the KYC process and 2) automatically collecting video at key moments that can be accessed during manual review.
1. Video KYC interview
A video KYC interview is exactly what it sounds like: an interview between the customer and a KYC agent, which takes place face-to-face over a video call.
During this interview, the agent asks the customer a series of questions and guides them through a number of actions, all of which are designed to help the agent detect liveness, identify signs of spoofing or coercion, and generally gauge the individual’s risk. When a video KYC interview is included in a company’s KYC flow, this interview is also typically when a selfie and government ID will be captured.
Video interviews can be an effective means of reducing KYC risk. But because these interviews are conducted by live agents, successfully incorporating them into the KYC flow requires thebusiness to employ a large enough team to handle the volume and demand. Likewise, video interviews can add significant friction, which users may not expect. For these reasons, it can be difficult to scale a KYC program that leverages video interviews, especially for businesses with smaller KYC teams.
With this in mind, businesses may decide to only leverage video interviews for higher-risk cases that require enhanced due diligence (EDD) — for example, if potential fraud signals are detected during document or selfie upload — unless the process is specifically mandated by regulatory requirements.
2. Automatic video KYC capture
Alternatively, it’s also possible to capture video and audio automatically during the onboarding flow. Some businesses might choose to capture video of the entire session, while other businesses may opt to only record video at key moments in the onboarding flow — such as during document upload or selfie verification.
This audio and video can then be analyzed for liveness detection, authenticity, and signs of tampering or coercion. Whether this analysis is done algorithmically or by a live agent during manual review will depend largely on the preferences of the business, as well as the capabilities of the product it is using.
Unlike a video KYC interview, automatic video capture doesn’t require a live KYC agent, offering a better user experience and making it much easier to scale with a smaller team and fewer resources.
What are the benefits of video KYC?
Because video KYC allows you to capture a wealth of information not normally captured in the traditional KYC process — information about the customer, their surroundings, and anyone else who may be present — you may be better able to identify and mitigate a variety of different types of fraud during your onboarding process.
For example, if an organization’s KYC process requires the user to upload a scan of their government-issued ID as a part of its identity verification flow, how does that business defend against a bad actor using a stolen, forged, or otherwise fake ID?
One option is to incorporate selfie verification into the flow. If the selfie taken and uploaded by the user doesn't match the face on the ID, it may indicate that fraud is occurring — raising red flags and triggering enhanced due diligence.
But selfie verification is not 100% foolproof either. A skilled bad actor may, for example, be able to use deepfake and AI technology to create a selfie that matches the photo in an ID, allowing them to skirt around this safeguard.
It's much more difficult to create realistic-looking video with deepfake technology than it is to create a still image, especially when that video contains a significant amount of motion. With this in mind, video KYC can be extremely effective at identifying spoofing, deepfakes, and other forms of fraud.
Likewise, because video KYC captures information about the user's surroundings (both visual and auditory) it can be helpful in identifying instances of coercion, where the user is being coached or forced to complete the account creation process on behalf of someone else.
What are the regulatory requirements for video KYC?
Currently, there is no regulation in the United States that specifically requires financial institutions to leverage video KYC.
That said, KYC regulations vary from country to country, and there are jurisdictions where video KYC is either required or explicitly allowed. Some prominent examples of this include:
- India: Section 18 of India’s Master Direction on KYC allows banks and other financial institutions to incorporate video KYC into their processes — specifically in the form of video KYC interviews.
- Spain: In 2018, Spain’s anti-money laundering authority, Sepblac, authorized video KYC procedures for financial institutions.
- Germany: Video KYC has been a part of the regulatory landscape in Germany since 2015, when Germany’s financial regulatory body (BaFin) introduced video KYC interview requirements for remote verifications.
- European Union: In order to be issued a qualified electronic signature (QES) certificate, an individual must complete video verification through either face-to-face or video verification.
With this in mind, it’s critical to understand the global KYC requirements for every jurisdiction that your company operates within or serves.
What industries does video KYC work with?
Video KYC is currently most commonly leveraged in the financial industry by financial institutions such as banks, lenders, fintech companies, payment processors, credit unions, insurers, etc. This is largely due to the fact that the financial industry is subject to strict KYC requirements as a part of anti-money laundering (AML) regulations.
That said, many other industries are also subject to laws that require varying degrees of customer identity verification. Online marketplaces operating in the United States, for example, must verify the identity and bank details of sellers who meet certain requirements under the INFORM Consumers Act. In Utah and Arkansas, newly passed laws require social media companies to verify the age of all users attempting to open an account. And digital health companies, subject to HIPAA requirements, must verify a patient’s identity before sharing protected health information (PHI) with them.
In each of these cases, video can play a role in the KYC process, even if it is not expressly required by law.
Does video KYC belong in your compliance toolkit?
Video KYC can be an incredibly powerful tool. Because it collects more auditory and visual information than would be captured in a single selfie or document upload, it gives businesses more data with which to gauge a customer’s fraud risk.
That said, video KYC may not be right for every business, situation, or use case. Even if you do choose to leverage it, it’s important to pair video KYC with other, complementary verification methods to build a truly resilient IDV process.
Persona’s flexible identity infrastructure gives you the freedom to build the verification flow that makes the most sense for your business, your industry, and your customers — whether that includes video KYC, government-ID verification, document verification, database verification, selfie verification, or another method.
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