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PFRDA Allows Video KYC For NPS: A New Era For Customer Engagement Despite many services and features being available online, NPS subscribers were still facing many challenges earlier

By Amit Das

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The Pension Fund Regulatory and Development Authority (PFRDA) permitted its intermediaries on October 6 to use video-based customer identification process (V-CIP) for new onboarding and/or account withdrawals by National Pension System (NPS) subscribers. PFRDA's announcement comes on the heels of IRDAI allowing life and general insurers to leverage video KYC facility, to vet customer credentials for new customer onboarding. Earlier this year, the Reserve Bank of India had amended the KYC norms, thereby allowing all banks and lending institutions to use V-CIP. Not to forget that most NPS distributors are regulated by the SEBI and RBI, who had already approved video-based KYC. It is not surprising that PFRDA has followed suit.

Why VCIP process is required

PFRDA which regulates NPS has been constantly introducing new methods of subscriber authentication and various modes of KYC to make the overall process seamless and subscriber friendly. It has already announced a slew of measures such as offline Aadhaar-based onboarding, third-party reliance for KYC, OTP/e-sign based onboarding and e-exit for e-NPS subscribers.

Despite many services and features being available online, NPS subscribers were still facing many challenges. They had to be present for in-person verification on the PoPs (points of physical presence) which resulted in a delay in the process of withdrawal as well as exit. Hence, V-CIP will do away with the requirement of compulsory physical presence.

Video KYC: Making life easier for intermediaries

As per the new guidelines, PoPs registered with PFRDA, must adhere to the V-CIP guidelines, issued by regulators for performing NPS related activities. By doing this the PFRDA intermediaries will not have any extra burden due to the introduction of the V-CIP facility.

Open NPS account from home!

With the COVID-19 pandemic forcing everyone into their homes, V-CIP is the need of the hour. Apart from making the overall process paperless and instantaneous, it helps subscribers, especially in the current situation as they can avail NPS services without being physically present at the POPs.

According to Pawan Agrawal, vice-president-pension sales, HDFC Pension, "Permitting the video-based customer identification process for NPS is a quick and efficient move by the Pension Fund Regulatory and Development Authority. This would help customers get the KYC verification done at their convenience and adhere to the social distancing norms at the same time.

Even before the lockdown, the compulsion to have a physical presence was creating hurdles for subscribers leading to delays in not only joining but in exit or withdrawal processes as well.

The early adoption of the video-KYC is an indicator that video assessment is the future of customer engagement all across sectors."

Cost-effective vis-a-vis Physical KYC

Video KYC will not only speed up the entire customer onboarding but also make it a cost effective process. Opting for digital video identification solution will also prove to be cost-effective as compared to physical KYC. If the average cost of physical KYC of the customer would cost INR 200, the video-based process cost will come down to 10-20 percent of the entire cost.

Reduces dependency on third party and 2-minute onboarding process

The traditional KYC process would take 10-15 days as there are too many steps and entities involved. At the same time, with the introduction of the guidelines, a direct two-way audio video communication, between the customer and authorized personnel of the entity, can be established, thereby eliminating the dependency on third party. This seamless process which can be done from the comfort of your home will also result in better customer experience at a fraction of the cost.

The introduction of V-CIP across all financial products will trigger a wave of financial inclusion among people who were unable to avail the financial services due to geographical challenges, time constraints or cost factor, up until now.

Amit Das

CEO and Founder, Think Analytics

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