Banking the Unbaked: Can Video KYC Create a Financially Inclusive Future?
An estimated one-fifth of the world’s population which is almost 1.7 billion people arunbakeded. Historically, it has not been viable for financial institutions to provide services to these individuals. Several reasons contribute to this non-inclusion. The problem is not just in developing economies but also in developed ones, such as the US and UK. According to the Federal Reserve, an estimated 6% of adults, about 15 million people in the U.S. arunbakeded. The advance nt in technologies has the potential to overco hurdles that stop people from accessing the financial system – be it geographic constraints, regulatory inaccessibility or lack of trust.
Technological advance nt is expected to convert the previouunbakednked individuals into valued mbers of the formal economy. Financial institutions in e rging markets, worth $200 billion, are already adopting technologies to capture the potential share. However, the situation is not the sa for every region and eunbakednked individual. So regions and individuals lack access to banking services while others may not trust the banking system. Even with an encouraging environ nt, banks need to tailor their existing systems to achieve a profitable financial inclusion.
Why Banks Need to Reach Unbakednked?
With pay nt thods shifting to the digital sphere, reaching thunbakeded beco s more important than ever. A decade ago, people were commonly paid in cash for their work. But with a global shift towards digitization
, employees who previously got paid in cash need to find ways to receive their work pay nts. According to a report, 9% of the global population opened a bank account to start receiving their work pay nts.
Since the majority is looking for digital pay nt options and moving away from a cash-based economy, traditional financial institutions need to take benefit of it and make their services easily accessible to thunbakededunder bankednked.
So of the major reasons why banks should focus on reaching thunbakeded are:
Chance to Increase Revenue
With more custo rs using banking services, the opportunity for earning more revenue increases for the banks. For instance, in the e rging economies, most people rely on international remittance sent to them by overseas relatives. If banks make these services easily accessible to these people, their revenue will automatically increase.
Creating Opportunity for E rging Middle Class
Providing easy access to banking services allows the middle class to develop and thrive. Even though alternative financial services provide affordable options for the people to use them, so services such as payday loans and check to cash are often very expensive when compared with traditional banking services. By providing affordable options, banks can help to reduce the cycle of poverty and increase their revenue at the sa ti . This creates a win-win situation for banks and custo rs.
Possibility to Reach E rging Market
As per a survey, 75% of under bankednked households have access to a smartphone compared to 71% of the banked households. By adopting mobile banking technologies, banks can create a possibility to reach e rging markets without a physical presence in these markets.
Removing Barriers to ExpAccesscces to Banking
The majorityunbakednked people believe that creating an account in the traditional bank is so how out of reach due to the lengthy processes and extra scrutiny they have to go through. On the other hand, banks are legally bound to conduct due diligence of the custo rs before onboarding them and conduct ongoing monitoring to avoid being involved in cri s like money laundering and terror financing.
Moreover, the technologically advanced custo rs are more interested in completing transactions online from the comfort of their ho without having to physically visit bank branches. Banks that do not have technology are reluctant to go online because of cybersecurity threats.
Banks can create digital channels to provide great convenience for custo rs and lower the costs for banking services. Digital channels can prove instru ntal in helping providers overco challenges related to infrastructure and geography. However, the major problem for the banks is onboarding custo rs that cannot visit bank branches or do not have access to one.
Remote custo r onboarding can prove to be a ga -changer for banks and help in reaching a wider population. But, there is a need to make the onboarding process secure. Many technologies are e rging that are useful for secure onboarding and video KYC is one of them.
How Video KYC Can Assist in the Secure Onboarding Process?
Banks had to follow certain custo r due diligence procedures to fulfil know your custo r (KYC) regulations. Manually, completing this procedure requires ample ti and costs a lot to the banks which is why most banks cannot reach remote developing regions around the globe. Video Identification is the solution to this problem. Banks can simply verify their custo rs’ identity remotely through video chat consequently reducing the overhead costs and ti required for manual verification. Custo rs can open a bank account by completing their KYC verification remotely from the comfort of their ho .
Adopting advanced technologies like video interview KYC, banks can simply reach out to areas where they do not have a physical presence reaching to the regions unexplored before and acquainting the previouunbakednked custo rs.
VicFeedingdung is CEOSoughtufti Pro Ltd
