In today’s world, technology makes things simpler for an individual institution to gather information about potential clients. However, forgery and fraud became easier to commit because everything can be edited and done in software, or anyone can hack and destroy a system online. As a result of this problem, financial institutions and other business industries have stepped up to develop a much more accurate Know your Customer (KYC) program.
New technologies for online identity verification are critical, as KYC adds friction to the onboarding process by requiring customers to go through various steps of identity and document verification. Prolonged waiting times are costly for banks and inconvenient for customers who expect a quick and easy process. The challenge is to strike a balance between KYC and the need for quick, efficient onboarding processes while providing a positive customer experience.
The KYC Process
Let us take a look at the step-by-step process flow to better understand the KYC procedures. Please keep in mind that the procedures may differ from country to country or depend on the additional steps required by the institution.
- Document Submission
An applicant or prospective user of financial services must submit documents to verify their identity and residency status. Document submissions can be made in either electronic or physical form.
Documents are divided into two distinct categories:
1 Proof of Identity documents – It must be an official government-issued ID with a photo of the individual.
Examples are:
- Driver’s license
- Social security card/number
- Passport
- Voter ID card
- National Identification Card
2 Proof of Residence documents – It must be an officially issued document, which includes the individual’s name and his/her current address. The majority of POA documents require a date of issue within the last three months.
Examples are:
- Bills for utilities
- Account statements
- Employment documentation
- Contracts for housing and leases
- Verification of Identity and Residency
It is frequently done by an authorized agency or organization based on the customer’s document. The residency verification process necessitates the resident’s resident status, whether he or she is a domestic or foreign citizen, current residential address, alternative or provincial address, and so on.
- Examination of the Financial Situation
To claim customers’ assets and liabilities, document verification, contacting the issuer, and performing physical checks.
- Transaction Monitoring
The financial institution checks the transactions conducted by the client. Any unusual transaction will be automatically flagged and will undergo stringent manual checks.
Innovative approaches to KYC
Institutions and businesses are constantly devising new methods to expedite the KYC verification process. Most of their services are being moved online, and they are expanding their user base with solutions for fast, easy, and low-cost online identity and document verification. Customers and businesses that use digital channels find it more convenient, quick, and painless. It also reduced the institution’s and businesses’ costs.
Some countries also implemented new online verification processes that were more secure and innovative. It includes identity verification from a digital image or video source (facial biometrics) and an in-built security feature that detects fraud attacks.
It is reassuring to see that institutions are now going above and beyond the minimum industry standards to ensure that they meet regulatory expectations while also developing effective solutions in terms of cost and creating a positive customer onboarding experience.