In the increasingly digital world, it is essential to confirm the customers’ identity than ever before. Amidst the increasing threats of fraud, identity theft, and money laundering, businesses are under pressure to have a clue of who they are doing business with. It is here where KYC solutions come into action.
What is KYC?
KYC is an acronym for Know your customer, a list of systems that businesses operate to ascertain the identity of their clients. Once rooted in the banking and financial industries, KYC is seen today as a regulatory requirement in various industries across the world. Its primary purpose is to curb illegal activities like money laundering terrorism, funding, and identity fraud.
A simple KYC process entails the acquisition and confirmation of customer data such as:
- Full name
- Date of birth
- Address
- Government-provided identification (such as passport, driver’s licence)
- Selfie/biometric information for use in matching identity
KYC processes are generally initiated when a customer is onboarded and can check up followed by the process of ongoing monitoring.
What Are KYC Solutions?
KYC solutions refer to software platforms or systems that automate and facilitate the process of verifying the identity of the customers. These tools limit the need for manual checks and offer secure, accurate and efficient methods of authenticating users.
Some major characteristics of contemporary KYC solutions are:
Document verification
Face recognition and biometric verification
Address validation
AML (Anti-Money Laundering) screening
Risk scoring and compliance reports
These solutions blend in perfectly with business platforms and allow organizations to easily achieve regulatory compliance with a low friction for the customer.
Types of KYC Solutions
KYC solutions are of different types depending on the needs of the business:
1. Digital Identity Verification
This approach advocates for the use of AI enabled tools to examine identity documents, perform biometric checks like comparing a selfie against a passport photo.
2. Video KYC
Applied in various parts of the world as a substitute to face-to-face checking, this requires the customer’s appearance through a video call that will be attended by a KYC agent who will identify the individual.
3. eKYC (Electronic KYC)
Widespread in areas such as in India, eKYC utilizes government data sets such as Aadhaar to provide immediate identity verifications.
4. Ongoing Due Diligence
Some solutions do more than onboarding and provide persistent monitoring of risky consumers, real-time notifications about suspicious activities, and automatic re-verification.
Why Your Business Should Use KYC Solutions?
1. Regulatory Compliance
Most countries have now made KYC procedures compulsory for businesses that are involved in the industries such as finance, insurance, crypto, and real estate among others. Non-adherence to KYC and AML laws may attract huge fines, legal implications or revocation of business licenses.
A proper KYC technology solutions implementation makes sure your business is being compliant to local and global regulations such as:
AMLD (EU)
BSA and FinCEN guidelines (USA)
FATF recommendations (International)
2. Fraud Prevention
Protection from fraudulent users is one of the key reasons for using a KYC solution. By first checking identities before providing access to restricted services or transactions, you significantly lower the possibility of:
Identity theft
Synthetic fraud
Account takeovers
Fake account creation
3. Improved Customer Onboarding
Manual identity assessment is subject to delay, lack of accuracy and frustrates users. Automated KYC solutions facilitate onboarding through automatic checking of documents and identities in real time, and sometimes even in as fast as 60 seconds. It translates to better user experience, higher conversion rates and faster account activation.
4. Cost and Time Efficiency
The outsourcing of KYC verification to a trusted party saves time, minimizes human error, and cuts on operational cost. There is no need for businesses to have large compliance teams on the payroll that would comb through documents manually.
5. Scalability
No matter if you are a fintech startup, or an expanding online marketplace, digital KYC solutions can grow along with your demands. Automated devices can perform large measures of verifications when customer volume grows without compromising accuracy and speed.
Industries that gain from KYC Solutions
KYC should not only be for banks. Many industries use these solutions to secure their operations and earn customers’ trust:
Fintech & Neobanks – For onboarding and AML compliance
Cryptocurrency Exchanges – to avoid illegal trading and comply with regulations
Insurance Providers – To authenticate customer’ identity and fraud prevention
Online Marketplaces – to promote secure transactions among the users
Healthcare Platforms – To secure sensitive personal date
Choosing the Right KYC Solution
As a business chooses a KYC solution, it should:
- Accuracy and speed of verification
- Compliance with international regulations
- Integration options with existing systems
- User experience and interface design
- Pricing and support services
Some of the popular KYC solution providers are Jumio, Onfido, Veriff, Sumsub, and Trulioo, which comes with different features depending on different needs.
Conclusion
In an age where digital transactions have become the norm and cyber threats are gaining momentum, having a stringent KYC solution in place is not merely a regulatory necessity, but a business necessity. By making sure you “know your customer” you are safeguarding your business, developing trust and gearing for future growth.
