Online KYC Verification — A Secure Way to Identify Customer IDs
Know Your Customer (KYC) is a standard identification procedure businesses use in this digital age. Through this method, a company may recognise who its customers are and how much risk they pose. The global E-KYC market size was valued at $1571.12 billion in 2021 and is expected to surpass $2792 billion by 2030, registering a CAGR of 21.55%. Thus, the most effective fraud prevention and risk reduction method combines AML and KYC regulations.
Briefly stated, Online KYC is the process of identifying business clients, the transactions they engage in, and certifying the legitimacy of the origin of their funds. On the other hand, AML screening involves running a background check on consumers to look for any indication of illicit conduct and checking them against international sanctions & watch lists. Thus, there are many benefits for organisations adopting KYC and AML standards. Let’s explore this more thoroughly.
Why is Online KYC Important?
Online KYC has become more crucial for other businesses because it prevents fraud, even though it was previously only necessary for banking firms. Consumers reported losing nearly $8.8 billion to fraud in 2022, an increase of more than 30% over the previous year. With the aid of KYC/AML processes, the firm can keep a record of consumers. This is especially important since it enables the provision of proof of client transactions if a company encounters any financial fraud.
The implementation of a risk-based strategy uses the same procedures. This enables businesses to assign customers a risk rating, allowing them to adhere to international KYC rules.
What is the Significance of KYC for Companies
KYC verification has many benefits for businesses. In the first place, digital identity verification systems ensure KYC compliance. These products analyse customers thoroughly using AI algorithms. Second, the biometric identification process is entirely automated and takes no time to finish.
Thirdly, replacing manual procedures with automation reduces the risk of error. Lastly, businesses require online KYC checks to ensure accountability because failure to comply can lead to hefty fines and numerous legal proceedings.
What is the Significance of KYC for Clients
Although the KYC procedure might seem challenging, the truth reveals the opposite. Companies typically use the online KYC process at the start of the account setup or registration procedure. By supporting businesses that strictly comply with KYC standards, customers contribute their part to maintaining a trustworthy culture. Consumers will know that the organisation is taking every care to protect their money. This allows a business to attract its clients quickly. As a result, there are lower drop-off ratios, and customer recruiting is up.
What Comprises the KYC Process?
Although online Know Your Customer processes fluctuate within jurisdictions and business sectors, it includes several phases. These consist of the following:
- Customer Identification
A corporation must first identify its clients during the onboarding process. To achieve this, end users must present their legitimate ID cards. OCR (Optical Character Recognition) technique extracts data from the submitted documents. The customer may next have to submit a selfie in support of the ID document to confirm the image on it. The consumer is good to go once the software cross-matches the information.
- Customer Due Diligence
Carrying out all required Customer Due Diligence (CDD) activities is a crucial online KYC requirement. The degree of CDD is determined by the extent of risk attached to the clients. For example, simple due diligence is applied to customers who provide little to no threat. High-risk customers, in contrast, are prone to Enhanced Due Diligence (EDD), which necessitates submitting extra documentation from the end users. These can contain identification that shows the customer’s current residence and employment information, among other supporting documents.
- Ongoing Monitoring
During the initial registration step, more than one client verification is required. Businesses routinely conduct know-your-customer and anti-money laundering checks to reduce the risk of fraud. An ongoing verification procedure leads to better risk assessment. A significant spike in transactions, unfavourable media attention of theft, and transfers to foreign corporations are just a few examples of situations that could prompt digital KYC solutions.
Final Thoughts
For the primary reason of adhering to AML and KYC regulations, financial firms like banks, stock markets, and FinTechs spend on identity verification systems. Financial institutions can reduce the danger of fraud by remaining compliant with these rules and building a solid brand reputation. All global firms must now deploy online KYC verification services since financial fraud is rising in every country.
