Reducing the soaring cost of KYC with online identity verification
Unmasking the myths and mastering Know Your Customer (KYC) with all its legal ramifications, costs and complexities, can be a major challenge even for an astute organisation. However, getting to grips with online identity verification presents many opportunities to improve efficiency and reduce costs.
The acronym KYC might seem insignificant to most people, but it is of utmost importance in the business world and you had better know your customer well if you’re a financial institution looking forward to a long and healthy future. But, before we dive too deeply into the details let us take a quick look at what KYC is.
How does KYC help us?
Know your customer ('KYC') is the process of an organisation verifying the true identity of its customers and evaluating the potential risks of illegal activity being carried out via any of its business relationships whether they be individual or corporate.
Truly knowing your customer is a challenge and so businesses typically verify the identity of the other party either before or during the time they enter into a deal with them. The term KYC also refers to the regulated bank practices that are similarly used to verify individuals’ identities. It is vital for financial institutions to perform this fundamental practice in order to protect themselves from fraud and losses and from illegal funds transfers and transactions. Failing to carry out these checks thoroughly can lead to severe penalties and hefty fines. KYC refers to the steps taken by the respective businesses to establish the identity of their customers and to understand the nature of the client’s activities. This involves establishing the source of the customer’s funds and to assess money laundering risks associated with the customer.
A recent Thompson Reuters survey revealed the true extent of the escalating costs and complexity and the negative impact it was having on business. It painted a clear message – that the costs and complexities of KYC are increasing in real terms and that businesses are spending large sums on processes that surveys show in most instances do not give their customers a good experience. A survey on the corporate customers found that 89% had not experienced a smooth or convenient KYC process and 13% stated that this might adversely affect their relationship with the financial institution. For many businesses the true costs were much higher than anticipated and over a third of firms cited that scarce resources remained their biggest challenge.
So why is this KYC process so inefficient?
KYC is mainly regarded as a ‘work in progress’. There is never an end in sight to close all the potential gaps and loopholes in the process. Techniques have to be constantly updated in order to thwart any new tax evasion or money laundering threats for fear of receiving penalties and the adverse publicity that brings. Moreover, the new rules and ‘obstacles’ being frequently introduced are forever increasing the burden and costs for both the customers and the firms. For many businesses, their KYC processes are stuck in the era where customers had no other option other than to walk into the financial institutions, present documents and fill out the forms in person in order to conduct their business activities. In this digital age these antiquated manual processes make customers weary and divert human resources, often the most expensive asset of the business, from performing core business activities.
There is a great opportunity for artificial intelligence. Technology can be used to flag potential fraudulent activities and thereby reducing the need for time-consuming manual processes. It is true that AI has not yet reached the point where it can provide in-depth analysis of unstructured documentation, but that doesn’t diminish its efficiency. Accuracy and adaptability should be key factors when businesses embrace and invest in KYC.
The speed and cost reduction of the digital KYC processes will help the business more easily identify the suspicious activity from the plethora of inconsequential data. This will allow it to focus only on items highlighted to be significant, thereby saving precious time. All workflows should optimise the use of technology to achieve their full potential.
How can Selified help with KYC and online identity verification?
The Selified service is a one stop ID verification service that can verify any customer from anywhere in the world through any device. Organisations can either send their captured customer identity and proof-of-address document images to the Selified service for verification, or they can send customers a white-label link which leads them through a simple document image capture and verification process.
The Selified identity verification service seamlessly verifies an individual by asking them to take a special ‘selfie’. Selified extracts data from the ID, verifies this information through its progressive identity verification workflow and provides an immediate result. It’s simple, quick and customer friendly. This improved online identity verification experience will result in more customer acceptances, fewer dropouts and will help you to establish a long and trusted relationship with your customers.