Photo: Pradeep Gaur/Mint
Photo: Pradeep Gaur/Mint

Fintech industry weighs AI-based solutions for e-KYC

The AI-based application being considered will help customers send their identity proof over the web

New Delhi: The fintech and payments industry, including banks and non-banking financial companies (NBFCs), is considering artificial intelligence (AI)-based solutions for fulfilling e-KYC (know-your-customer) requirements as there is no clear mechanism in place to verify customers digitally, two people familiar with the development said on condition of anonymity.

Representatives from the industry have held several rounds of discussions on alternatives to Aadhaar-based e-KYC, said these two people.

“There will be more rounds of deliberations and consultations and once the solution is finalized, it will be presented to respective regulators such as the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) for approval," said the first person cited above.

Private companies have been unable to carry out Aadhaar-based e-KYC after the Supreme Court’s decision on September to bar private companies from accessing the Aadhaar details of consumers.

This has also affected their business. Consumers, too, have no clarity on how to complete the verification process without Aadhaar.

The AI-based application being considered will help customers send their identity proof over the web, enabling their facial images to be captured by the app from different angles to ensure liveliness. (Liveness is the ability to check whether it is a photograph before the camera or an actual human being), according to the second person mentioned earlier.

Video-based KYC is also being considered as additional authentication where a video will be recorded by the app to ensure liveness, said this person.

The payments industry is looking at digital alternatives as it is not possible to do physical verification on a mass scale, according to the second person cited earlier.

In an offline model, physical documents submitted by a customer are shipped by the firm to the verification centre and the customer is called up to cross-verify details, a process that takes 24-36 hours.

Also, the cost of authentication might go up from 15 per person, which is the current cost of e-KYC verification, to 100 per person for a physical KYC.

A five-member Constitution bench of the Supreme Court had on 26 September barred private companies from accessing Aadhaar details of consumers.

This affected telecom operators, wallet companies, banks and fintechs who had been using the biometric database for instant electronic verification of would-be subscribers. These firms have stopped using Aadhaar for authentication, in light of the Supreme Court order.

“The idea is good. However, we’ll have to see how people are able to adapt to these methods. It is also important to note that these companies have already invested heavily on setting up the Aadhaar-based KYC infrastructure and now additional investment would be needed to set up the new infrastructure," said Ashish Aggarwal, senior director and head of public policy at Nasscom, the IT industry lobby.

Earlier this month, the department of telecommunications and the Unique Identification Authority of India proposed a new mechanism, a mobile application with a one-time password, for instant verification of new mobile phone subscribers.

The new process will involve photographing customers with location and time stamps, and will also require them to submit identification documents.

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