BackMFs explore digital solutions to continue paperless KYC
As an immediate fix in the absence of Aadhaar-based KYC verification, some AMCs are relying on video KYC
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Kotak Mahindra Asset Management Co. Ltd recently announced “video KYC" as a digital solution to continue paperless know your customer (KYC) verification even in the absence of Aadhaar-based authentication.
The Unique Identification Authority of India (UIDAI), through a guideline last month, mandated asset management companies (AMCs), registrar and transfer agents (R&Ts) and online distributors to discontinue Aadhaar-based KYC by 20 October. “This came as a hit because KYC verification using Aadhaar and OTP became popular especially among direct investors and in B towns," said Jimmy Patel, CEO, Quantum AMC.
AMCs, including Kotak Mahindra AMC, are now looking for alternatives.
As an immediate fix, some companies such as Quantam AMC, FundsIndia.com, Reliance AMC (according to the company’s website) and Kotak Mahindra are relying on video KYC verification. Earlier, video KYC was used as an alternative for in-person verification (IPV) by some companies.
“Getting back to physical authentication would not serve the purpose because now investors want to get things done faster. Physical authentication works in case of branch-led environment supported by the distribution community," said Patel.
Investors who did their e-KYC through Aadhaar were allowed to invest only up to ₹ 50,000 earlier. To invest more, they had to complete their KYC, either by visiting a branch, or by completing IPV through video KYC, according to Sebi rules.
Now, video KYC can be an option for any amount of investment. Patel said “the number of people seeking KYC has come down". Perhaps because video KYC is a tedious process. Also, “there is no clarity yet from Sebi on what can be done for digital KYC verification for investments below ₹ 50,000," he added.
Video KYC requires an investor to upload identity proofs such as photograph, address proof, a cancelled cheque, PAN card and signatures on the AMC’s mobile application or website. On uploading all documents, you are required to start real-time video recording using the front camera on your smartphone and display a hard copy of all the documents for 10 seconds each. Kotak AMC’S mobile app asks investors to say ‘Hi’ followed by the investor’s name at the end of the video recording.
“Now the only form of digital verification we can do is to shift to soft copy from hard copy by using video KYC which will still not be as fast and self-managed as Aadhaar-based OTP verification," said Srikanth Meenakshi, co-founder and chief operating officer, FundsIndia.com. “Uploading so many documents and then recording the video is a huge impediment. People have to be sufficiently motivated to do a video KYC and even more motivated to walk up to the AMC to complete the KYC process in person," he added.
Quantam AMC is looking at alternatives for faster digital verification of KYC and is hoping for UIDAI’s approval.
The company is testing the usage of Digilockers, a digital locker service operated by the government of India, where citizens can upload all their documents on the cloud and send individual links to each. “The customer can upload his Aadhaar, send the link to us so we view it and authenticate the QR to update the demographics. Here the only difference is that Aadhaar details or the Aadhaar image will not reside with us. It will be with the government portal," said Patel. “We will ask customers to open a Digilocker account and upload all their documents there in an open environment, including Aadhaar."
Meenakshi said even if UIDAI allows fund houses to access Digilockers, it will still be difficult to get investors to open Digilocker accounts as they are not very popular yet.
The MFs digital KYC space is still evolving and adjusting to new rules. Watch this space.
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