What is ‘KYC’ and why do we need it?
If you’ve ever filled in an online application for opening a new bank account, a loan or another financial service, you’ve probably gone through an online identity check.
Short for ‘Know Your Customer’, KYC is all about securing that you are who you say you are.
But what does it actually mean to “know your customer”? And why is that process more important than ever?
How to know your customer
To keep financial services free of fraud and money laundering, KYC is a regulatory requirement that may seem insignificant to a lot of people, but for financial businesses it’s the alpha and omega.
Simply put, KYC means verifying the identity of customers either before or during the time they start using a financial service.
But how do businesses actually do that?
To avoid manual and time-consuming processes associated with performing KYC checks, financial businesses have the opportunity to team up with new and innovative KYC services.
In these checks, it is common for services to ask customers for the following:
- Proof of identity
- Proof of address
Establishing trust in the digital age
But why KYC? And why right now?
As we move further into the digital age, trust becomes an increasingly important factor when talking about the financial industry.
But instead of having to enter a physical bank branch to prove your identity, new technology has made it possible for financial services to verify their customers online.
This allows businesses to ensure a trustworthy relationship with their customers, and comply with KYC and anti-money laundering requirements, while at the same time immensely reducing manual processes.
Frictionless onboarding, better retention
But KYC is also about much more than ‘just’ living up to international legislation.
Instead of going through a long and time-consuming verification process, businesses can automate the KYC flow to their own benefit.
With a frictionless KYC flow, financial businesses are able to improve the on-boarding process for their customers and improve the retention rate.