Fintechs, NBFCs move to cloud to speed-up transaction, KYC process

Navdeep Manaktala, Director, Startup Business, Asia-Pacific at Amazon Web Services (AWS) said that apart from fintechs and NBFCs, edutech, and mobile gaming startups were also their most active customers during the lockdown phase.

Ahmedabad-based fintech startup EasyPay, which offers a point-of-sale (PoS) based retail payment solution for offline store owners in remote towns and villages recently pivoted to a cash withdrawal service after the first phase of lockdown was announced in late March 2020. EasyPay’s Paisa Nikal currently allows users in Tier-2, 3, and other remote areas to draw-out cash by visiting local retailers instead of ATMs—which is scarce in remote towns and villages.

“By integrating with Aadhaar Enabled Payment System (AePS), Paisa Nikal enables customers to visit any registered retailer without the app installed, and avail basic banking services without visiting a bank’s branch," Nilay Patel, Founder and MD, EasyPay said in an email interview.

The Paisa Nikal cash withdrawal service is rather similar to the mobile ATM products that were launched by many banks after ₹500 (old note) and ₹1,000 banknotes were demonetized in November 2016. The app facilitated more than ₹1400 crore of cash withdrawals from 15 million people using this model during the lockdown period.

However, transactions took anytime between 45 to 50 seconds to go through, and users were unhappy

“Paisa Nikal adopted Amazon CloudFront, a CDN to help bring down the transaction processing time to just 5 to 6 seconds. Their transactions processing time were unacceptably long for users since the app earlier depended on a traditional data center to process transactions," Manaktala said during a phone interview.

CDNs are an alternative to physical data centers operated by a company. Amazon CloudFront operates a large distributed network of more than 188 CDN server locations around the world referred to as points of presence (PoPs). Around 18 of these PoPs are currently distributed in India.

Apart from CDNs, video-based recognition infrastructure offered by AWS which reads human emotions were also on the top list of products used by online lenders and banks. Pune-based Workapps which provides enterprise-grade customer messaging platforms to banks, NBFCs fintechs, and insurance firms turned to Amazon ‘Rekognition’ service to offer video-based KYC for their clients.

Video-based KYC saw large scale adoption by banks, fintechs, and online lenders after the lockdown. On Jan 10, 2020, the RBI put out detailed operating guidelines for regulated entities to perform video-call KYC instead of customers physically verifying their identity at offline branches.

Amazon Rekognition service can inspect video calls in a real-time basis, and using more than 50 predetermined facial data points, the platform can recognize if the user has "grown a long beard or if they are wearing glasses", Manaktala said.

The video KYC also works in combination Amazon Textrack which is an optical character reader (OCR) platform provided by AWS. It automatically reads text from KYC documents submitted by the user. This helps banks and online lenders to recognize users by matching biometric data pulled from government ID cards and matching it with the video-call placed during KYC process.

However, policy researchers and privacy experts have sounded alarms on potential misuse of such technology. The RBI in its detailed guidelines in January said that regulated entities (banks, NBFCs, online lenders) will have to ensure that the video recording is stored in “a safe and secure manner and bears the date and time stamp".

Shashidhar K.J. an associate fellow at Observer Research Foundation (ORF) told Mint that on the absence of comprehensive biometric data storage and processing law, it is “unclear if any amount of self-regulation is followed while storing video calls and biometric data".

"Earlier many banks like ICICI Bank had set a precedent for some sort of video-KYC through their tablet banking initiative long before the RBI guidelines in January. ICICI Bank offered this as a convenience option for customers. But it is still not clear if the video recording for KYC purposes stored by one bank or an NBFC can be accessed by another bank or lending institutions when customers avail multiple products of same nature", Shashidhar added.