Imagine the troubles you have often had to undergo to open a bank account or take a loan. Creating photocopies of your ID and address proofs, having a face-to-face meeting with the bank, and then waiting for days to get the product you wanted. All this will be history soon. You will be able to get your financial product by just opening an app on your cellphone, authenticating yourself electronically without having to submit a single sheet of paper, without having to meet anyone from the bank, and opening your account in minutes. This isn’t science fiction. This is already a reality —partly so.
In December 2016, Reserve Bank of India made an amendment to the Master Direction (MD) on KYC allowing opening of savings and loan accounts through instant, paperless, and presence-less modes. This allowed you to open accounts by completing e-KYC via OTP. However, the accounts have limitations. You can only borrow up to Rs 60,000 this way; your savings account can’t aggregate more than Rs 1,00,000 in a year; and you can’t open credit card accounts. Also, you needed to complete the full, offline KYC within a year for your account to remain operational. The MD was amended after there emerged an urgent need for people to open bank accounts in the aftermath of demonetisation.
What is required now?
Despite e-KYC, the bank today still needs to meet you to complete your KYC via biometrics or countersigned documents. This increases costs of account opening for the bank. Also, your ability to open this account is limited to having a branch in your locality. Today, more and more Indians look to their smartphones to access goods and services. Therefore, three things need to happen now. One: Non-face-to-face KYC should be considered complete KYC. Two: Larger loan sizes should be disbursed via the e-KYC route. Currently, the cap of Rs 60,000 is extremely low compared to the average size of loans taken online (upwards of Rs 3 lakh). Three: Credit card accounts should be allowed to be opened via the e-KYC route.
Is presence-less onboarding safe?
When you open an account, the bank needs to establish that the application is indeed from you. So it meets you, verifies your documents, and takes your signature on its forms. This has been the way of business for years. These methods, however, aren’t as failsafe as authenticating you through your digital footprints. Through a combination of digital and surrogate checks, the applicant’s identity can be established beyond reasonable doubt and remove the possibility of identity theft, which is what the industry wants to guard against. This way, presence-less account opening can be a reality. Also, digital checks are instant.
Presence-less KYC methods?
Aadhaar-based OTP is now well-known. You can also be authenticated through your PAN NSDL data. Today, there are also methods such as Penny Drop, wherein Rs 1 is deposited into your savings account, and the resultant ping-back establishes that you own a KYC-compliant bank account. Fintech is also experimenting with video KYC, wherein via a video app, you complete a liveness check (proof that you’re a living person) through a series of tasks, such as moving your eyes before the camera. These methods can do away with the need for countersigning and biometrics, which are costly to the industry, especially on loans and products where margins are limited.
Paperless finance has become a reality. Now, it’s time to work towards presence-less finance.