Most financial service firms are adopting Know your customer (KYC) processes. The tough regulatory landscape and evolving technology are further enhancing this trend. That means financial institutions must choose the right KYC companies to work with.
More often, these institutions must conduct customer due diligence during registration. This helps verify customer data to cut risks and ensure compliance. By working with the right KYC provider, banks can streamline the verification process.
But what is KYC, and what’s involved in the KYC verification process? We’ve detailed some things you should know about KYC. You’ll also learn how to pick the best company from the many E-KYC solution providers.
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Understanding Digital KYC Solutions
E-KYC or electronic know your customer follows a set of processes and procedures. First, everything is digital hence the term electronic. The main goal of KYC processes is to ensure customer due diligence. That way, businesses and financial institutions can keep away fraudsters. It also makes financial transactions safer and more reliable.
To date, several financial and investment institutions have adopted KYC. These processes help verify customers and their financial & risk profiles. Different regions or countries also have regulatory frameworks that dictate KYC procedures.
At the heart of E-KYC is a sophisticated online identity verification technology. Advanced technologies such as AI and Machine Learning algorithms help automate verification. All these also integrate into the registration and onboarding processes.
For example, banks can verify your documents using optical character recognition technology. Another technology is biometric authentication which can capture your face or fingerprints.
Besides offering advanced security, well-integrated KYC processes also enhance customer experience. The other benefit of KYC is that it helps combat money laundering activities. In some instances, it’s possible to differentiate low-risk customers from high-risk customers. This is done by sampling customers’ identities, addresses, and financial transactions.
And while KYC technologies may seem straightforward, implementing them can be challenging. The best KYC software for banks integrates several banking workflows as one solution. We’ve highlighted how to identify the best KYC verification companies below.
What to Look for in KYC Providers
Identity verification is a critical part of customer registration and onboarding. And for every financial service firm, choosing the right KYC provider is a priority. This is true, especially for banks with a digital presence and who want to onboard customers.
Choosing the best KYC provider from the flooded market can be daunting. A rule of thumb is to do your research and compare services from several providers. You should also know what you want from a KYC company. That way, you can spot those that meet your needs.
Here are some of the things to look for in a KYC verification service provider.
- Industry experience – make sure the company has a proven track record in your niche. Certain providers have specialized in particular industries. For example, payment platforms, fintech, banking, and crypto firms.
- Regulatory compliance – your KYC provider should help you ensure compliance. Navigating compliance in the financial service sector can be challenging. You need an industry leader that understands and meets the industry standards.
- Security and customer due diligence- the best KYC provider has a solid security framework against fraudsters. If bad actors compromise biometrics, for instance, they can break the entire system. Always choose a company whose systems are well-secured. You can look up the company’s history to check its commitment to online security.
- Continuous monitoring – this is one of the main pillars of KYC. A provider that offers continuous transaction monitoring ensures proper documentation and real-time reporting. It’s with constant monitoring that you can prevent account takeover. Or even detect chargebacks or money laundering activities.
- KYC architecture. Depending on your goals for using KYC, digital architecture plays a critical role. Choosing the right design allows for efficient, effective, and compliant verification.
With several companies now offering KYC as a service, the costs have also dropped. Remember that the higher the cost of KYC services, the lower the profit margins. And this may not be healthy for smaller organizations.
Apart from the above factors, you should also pay attention to the provider’s reliability. For instance, what is the average verification time? Or does the provider offer an easy-to-use data management platform? Is it possible to automate compliance? Always seek answers to these questions when comparing your options in the market.
Final Takeaways
The digital world, by default, is unsafe. That means KYC providers must focus on security as part of their solutions. Additionally, each organization is different. Hence, not all KYC software solutions will work for you.
A seamless KYC process boosts customer experience and increases conversions. But a messy one could comprise the security and trust of your customers. The best KYC software integrates the right technologies and processes. And it’s your duty to choose one that suits both your current and future needs.
