KYC onboarding in financial institutions: A best practice criteria catalogue for selection of video identification frameworks

Abstract

As a consequence of Covid-19 and the accompanied lockdowns, the demand for digital banking products and services has increased dramatically. Furthermore, the digital transformation in general has been significantly accelerated by the events of the past two years. For many banks, often with a long history, it is difficult to adapt to the new conditions so quickly. Established banks often need decision-making tools that help them use new technologies successfully and appropriately. In this thesis, alternatives to physical identification, which every new customer who wants to use a bank's product has to go through, are presented. In particular, video identification, which became legally effective as of 1 July 2017, is discussed. In order to find the right provider or software for video identification, the criteria catalogue provided in this thesis offers the necessary basis for banks to decide which provider meets their requirements. The criteria catalogue is based on Austrian national law and thus on the generally applicable directives of the European Union on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing and also on the regulation on electronic identification and trust services for electronic transactions in the internal market. The criteria are kept general in order to be able to follow a best practice approach and to be validated by experts from the banking industry. Furthermore a general defined best practice criteria catalogue can also be applied to other jurisdictions. The validation through expert interviews supports the hypothesis that the criteria catalogue provides a good basis and meets all legal requirements for making a decision on which provider is suitable for a bank. The experts receive a holistic overview of the applicable guidelines and can thus make a decision regarding the use of video identification software quicker. Furthermore, the criteria catalogue can be used to check whether the video identification software already in use meets the current requirements.