-By Praveen Paulose, MD & CEO, Celusion Technologies
For any financial service, no matter how big or small, customer identity verification is of utmost importance to both banking corporations and customers alike. Adequate identity verification is essential for ensuring compliance with regulations such as AML/Anti-Money Laundering. Accurately verifying the identity of customers helps banks assess and mitigate risks associated with fraudulent activities, such as identity theft and account takeover.
In addition to security and compliance, customer identity verification enhances customer experiences when implemented effectively. Streamlined and user-friendly identity verification processes make it easier for customers to open accounts, apply for loans, access banking services, and reduce friction in their interactions with the bank.
What is KYC?
KYC, i.e., Know Your Customer/ Client, identifies, verifies, and authenticates customers’ identity when opening an account with a bank or a financial institution. Since the early 2000s, the Reserve Bank of India has made it compulsory for corporations to undergo this procedure with customers. In this, customers must submit documentation before investing across different instruments.
Today, KYC is an integral element in customer security for banking, providing them with much-needed protection against cybercrime, money laundering, fraudulent transactions, and other illegal actions in the digital age. This is achieved via stringent protocols, such as ID verification, face verification, document verification, address proof, and biometric verification, among other acts. All banks are required to comply with these procedures to ensure customer safety.
Why is KYC important?
The importance of KYC is mainly attributed to the security it provides to customers, looking after financial bodies and keeping a close watch on any possible fraudulent activities. With KYC, banking corporations can verify the legal status of any customer who wishes to avail services like investments, mutual funds, and more. This is supported by procedures such as cross-checking customer addresses, identity verification of beneficial owners & authorised signatories, and the nature of employment/ business carried out by the customer, to name but a few.
Added advantages with KYC processes
Know Your Customer (KYC) processes offer several advantages over traditional customer verification, identification, and authentication methods. This is attributed to their efficiency, accuracy, and adaptability. KYC does away with the manual paperwork and face-to-face interactions that can often take time and effort. It speeds up the processes, each of which can be done online, by reducing the time spent by customers on opening accounts or accessing different services. Moreover, KYC processes use advanced algorithms and data verification techniques to ensure accuracy in customer identification. This also decreases the chances of human errors, incorrect data processing, document misinterpretation, etc., commonly seen in traditional methods. Within KYC, every process is standardised, and customers can always expect consistency across every interaction. This means that every customer undergoes the same level of scrutiny.
In today’s ever-changing world, KYC can accommodate many customers more efficiently than traditional methods that generally require additional workforce and resources. This makes it much more cost-effective and sustainable, especially in the long run. Additionally, thanks to the integrated technological systems, KYC can seamlessly integrate with digital banking and financial service platforms and provide customers with a more streamlined and holistic experience.
This increases efficiency and reduces time, leading to much faster onboarding and an overall positive experience. In an era where customers seek more personalisation in their services, KYC also offers that. With intensively collected insights, KYC can personalise product recommendations and services as per what customers need for themselves. This further enhances the customer experience in the long run.
Customers can also receive real-time updates, recommendations, and support regarding the status of their verification processes. This greatly reduces any unwanted feelings of confusion, uncertainty, and frustration that can plague customer groups.
Upon completing the required KYC processes, customers can enjoy easy, seamless, and hassle-free financial transactions with banks, all at a fast pace. By automating the KYC processes, fund transfers, loan approvals, and other banking activities get more streamlined, upgrading customer’s banking & financial experiences.