Video Identification in Fintech: How Camera Technology Enhances Your App

Cameras in fintech applications can become a window to new financial freedom. The video identification process can enhance the know-your-customer (KYC) process, allowing it to use algorithms that recognize and verify users a lot faster.

Many business owners have the same view on video identification. This drives the market segment to a quick expansion with a CAGR of 15.29 during the years 2024-2032. The quick growth signifies video KYC as one of the major innovations in fintech for the upcoming years.

In this article, I will explain video KYC as a technology, how it works, how it can be used in fintech, and the challenges of implementing it. Let’s explore the topic together!

What is Video KYC?

KYC, including video KYC, is a complex process that, despite its complexity, is mandatory for any financial application. Let’s break down both these concepts to fully understand why video KYC is different.

KYC is a set of procedures aimed at identifying and verifying customers or persons acting on their behalf, assessing risks, and preventing illegal activities.

If you want to know more about KYC or why it is needed, read this comprehensive KYC guide.

Video KYC, essentially, follows the same idea but utilizes more advanced technologies. Let’s define it.

Video KYC is a digital identity verification process that utilizes video technology to identify and verify customers or persons acting on their behalf in real time.

Just like a standard KYC process, video KYC can utilize different methods with the same aim. Most often, video identification (ID) will include a live video of a user with their identity document. Sometimes, the user might be asked to perform certain simple activities by the app, such as blinking or moving their head.

In some cases, videoID might require QR-code scanning or will recognize the documents presented to the system. Essentially, it depends on the technologies used and the needs covered by them.

But before we proceed to the use cases of video identification in fintech, let’s examine the process that this technology typically follows.

How Video KYC Works

Video verification KYC is a complex and multi-step process that connects front-end and back-end technology to maximum efficiency, yet it can be explained in simple terms. So, without further ado, let’s take a more detailed look.

1. Process initiation. For this, they need to launch an app. The application must request access to the camera, which will allow it to capture the video.
2. Data capture. The integrated camera registers the raw image data, measures the distance between the device and the user’s face, and analyzes the user’s unique facial features. This creates a 3D profile that cannot later be fabricated.
3. Facial identification. After capturing the data, the algorithms process and validate it through the confirmation with registers that have the same data on the user. If the registered data and the data the app received match, the KYC process is completed. Liveness detection is employed here to ensure that a live person is present during the verification process, enhancing security by differentiating between real individuals and potential impersonators.
4. Document image verification. This is an optional step if the application requires the user to present their identity document to complete the verification. The camera can capture and identify the ID document or scan the code engraved on it in a similar fashion – connecting with a database to verify the customers’ persona. If the data match, the process is then completed.

Alternatively, a video KYC interview is possible. It is a remote identity verification process in which a customer interacts with an agent or an AI system. In this instance, the verification video would be recorded through the call; if the agent is involved, then the process would be manual.

After reviewing the process, we can move on to the use cases of video identification in fintech. The next section will discuss this further.

How Can Video ID be Used in Fintech?

Video identification can have several uses in fintech, including the ones discussed before, such as video interviews or facial recognition. Yet, there are more ways to utilize this technology.

Video identification can also streamline customer onboarding by ensuring thorough verification and compliance with regulations. This can ultimately improve trust and reduce identity fraud and identity theft risks for businesses.

#1 QR-Code Scanning

In this instance, the camera is utilized purely for photography, and video is not required.

QR-code scanning in video ID is an online process of utilizing QR codes on government-issued documents to facilitate the KYC process.

This process usually takes less than 100 milliseconds, which makes it very efficient and, in certain instances, customer-oriented. Behind this is the idea that the software can recognize the QR code and verify it through database connections.

Example: I’ve encountered this previously with one of the identity verification software products. We were creating software that could recognize an identity document by making a picture in the application. If the ID document had a barcode, the application could scan it and pull up the information on the person’s identity through the governmental registers.

Now, when we need to create solutions like these, I always propose connections with governmental registries. Working with one of the Indian projects, we’ve created a solution that could scan the Aadhar code – a voluntary card code that registers the demographic and biometric information of the user. This automation enhanced the software’s workflow.

#2 Facial Recognition

For this use case of identification video used in fintech, video would be used to provide a more secure KYC process. As pictures lack depth, normally facial recognition would utilize videos to recognize special features of the user.

In this case, facial recognition refers to the process of recognizing a user’s face to verify their identity.

This is normally a more complex process, yet it is still very quick and user-friendly. There is always a challenge, however, of it being more obtrusive to the customer.

Example: I personally encountered this problem with one of the applications I’ve worked on. The application would simply not allow the user to conduct the verification process in dim lighting. Our team then decided to opt for automatic screen flashing in the app to enhance the lighting conditions.

Longer verification processes would rather impair user experience. So, I recommend connecting with a specialist team capable of creating applications that can utilize technology to become simpler by becoming smarter.

#3 Video Interview

As mentioned before, a video identification interview resembles an old-school verification process in which a user connects to a live agent on a call or uses AI.

In video KYC, a short interview is conducted to capture both facial details and the document presented for the user’s ID.

Sometimes, a video call can also utilize voice, but this goes beyond the scope of video call identification.

Now, having reviewed the most prominent use cases of video verification KYC for fintech applications that use cameras, let’s examine how video KYC can be integrated into the fintech app.

How Can You Integrate Video KYC?

Basically, there are only two options for integrating video verification KYC: Native technologies and ML algorithms.

#1 Native technologies. They will utilize hardware and are developed by the OS’s creators, so they are usually supported by the system. They are specifically optimized for the OS’ performance, so will be most efficient for mobile application development.

#2 ML algorithms. These technologies can integrate with cloud-based machine learning services and create models trained on your data. Therefore, they will recognize faces based on the input your team provided while training the models. This enhances the scalability but is more costly and requires more maintenance to avoid visual bias.

In the following table, I compare the Native technologies and ML algorithms:

To draw conclusions, native technologies would be more acceptable for businesses seeking a quick, scalable, and secure solution.

ML algorithms are a specific technology that requires a lot of maintenance and quite a heavy investment upfront. They would only be acceptable for businesses seeking to innovate with their application or provide KYC as a service.

Benefits of Video KYC for Fintech Applications

While video identification in KYC is quite a complex process, it offers several benefits for every fintech business. In this section, I will unveil some of them.

1. Accelerated KYC process. With facial recognition and QR-code scanning taking only milliseconds to complete, the KYC process will occupy less of your user’s time. This way, the application will verify the user’s video identity faster, bringing a smoother customer experience.
2. Enhanced KYC security. The depth that facial recognition possesses enhances the security of the KYC process by making the data much harder to fabricate. Additionally, the connection with databases and governmental registries enhances the probability of successful identification.
3. Enhanced resource efficiency. The hardware algorithms can detect insufficient lighting or other conditions and provide users with recommendations on how to fix them. This enables fewer failed attempts at KYC by ensuring that each one is sufficient for verification.
4. Better accessibility. Users with visual impairments can use the camera’s voiced instructions to pass the KYC check faster.

The benefits are quite understandable, but every process has its challenges and downsides. In the next section, I will highlight the challenges in video identification in KYC implementation.

Challenges with Implementing Video KYC

The video verification KYC system has a number of shortcomings that might make a business owner reconsider its implementation. In this section, I will review these challenges and explain how to overcome them.

#1 Device Compatibility

While video KYC has a number of methods to make it suitable for different devices, there is still a high chance that it might not be compatible with every single one. Some hardware’s power might not be enough to execute complex ML algorithms, other devices might not have a potent enough camera.

Example: Old smartphones might ask the user to repeatedly complete the same verification task due to hardware limitations and the inability to catch small movements. In certain cases, some cameras require much better lighting conditions than others.

This is a rare occurrence, however, as the native technologies are adapted for the particular devices that use them. Yet, if you suspect that your audience doesn’t use modern devices, you should opt for a different verification solution.

If you want to learn more about KYC providers, here’s an outlook of the most popular vendors on the market.

#2 Customer Centricity

Not all video identification in KYC solutions can warn your customer that they need better lighting conditions or certain other improvements to ensure that their attempt is sufficient for recognition.

Example: In unsuitable lighting conditions, the software might simply refuse to identify the users’ faces. This creates a more lengthy process that is highly obtrusive for the customer and can also impair the application’s resourcefulness, resulting in more failed checks.

This issue might be solved, however, by simply putting more thought into the integration with such a complex system. Ensure that your software can recognize the limitations of the hardware and warn your user about their ability to fix those limitations.

Create a simpler verification process, using fewer steps but ensuring that all these steps are performed at the back-end part of the system as well. For example, connect with databases. This will not only help your process be more customer-centric but also add an additional layer of security.

#3 Time Constraints

Integrating with video KYC can be a lengthy process that might also require maintenance. Previously mentioned back-end checks would also require additional time to create. All this turns videoID implementation into a time-consuming part of the development.

Example: Data can be fabricated through the video KYC if the verification process lacks depth. For example, a picture of a document being edited or even simply opened from another device or the face of a sleeping person being used to pass KYC verification. These issues can be solved if your team, like DashDevs, has enough experience with verification and can ensure that front-end checks are also repeated at the back-end level.

There is no way to bypass the need to be meticulous with KYC integrations. However, if the video KYC integration works correctly, the time spent on it can be compensated by the time saved by its workflow later.

With a suitable software development team, all the challenges and complications can become smaller obstacles. As part of DashDevs, I know how important hands-on practice is for matters as delicate as KYC, and luckily, the team I work with has abundant experience.

Final Thoughts

After major consideration, if you decide to opt for video KYC, remember that despite its constraints, it has benefits that might help make your business outstanding. To achieve the best possible results with it, however, ensure that you consider the need for customer centricity and its complex mechanisms.

DashDevs has been working with different KYC providers for 15+ years, creating fintech applications to stand out among their competitors. If you are interested in our help, simply drop us a line.