Online KYC or digital Know Your Customer refers to the process of the verification of customer or client identities. This is critical for allowing businesses to ensure safety of their processes as well as their customers. KYC online is an essential part of preventing financial crimes like money laundering and terrorism financing among others.
For a long time now, the method of processing KYC has been very traditional. This traditional KYC is a manual process that requires customers to provide documents issued by a government authority. These used to include documents like drivers’ licenses, passports, etc. Furthermore, for each of these customers, there used to be required to visit their banks or offices in person to initiate, regulate, and keep a check on all processes. Today, however, the case is different. Thanks to the advent of technology, users simply need to process things on their phones or via computers. Online banking, just like other digital services, has today revolutionized customer-business relationships and interactions.
The Evolution of KYC
Online KYC regulations have evolved over a very long time. This shows up very well if we look at today’s changing financial landscape. Years ago, in the earlier days of digital banking, KYC regulations were easy going and convenient to execute. Unfortunately, however, this also meant they were easy to bypass. Over the course of history, these laws, in response to increasing and evolving financial crimes, regulatory authorities have made these laws more stringent. This means that the KYC online verification laws today are more tight and strict, with less flexibility. Furthermore, this increasing strictness of laws is visible in the regulations of all national and international regulatory authorities.
For example, in the United States, the regulatory authority that is the Financial Crimes Enforcement Network (FinCEN) requires compliance of banks and all other financial institutions. These institutions must responsibly verify the identities of every client or customer that engages with them. This engagement includes opening new accounts, making transactions, etc. Generally, the verification demands authentication of customers’ names, addresses, dates of birth, and Social Security numbers, etc. However, this is not all, and often other data such as tax information, utility bills, and employment records etc may also be demanded.
Why Online KYC is critical
Modern KYC compliance check online offers critical benefits to the businesses that make use of it. These benefits stand tall in comparison to the traditional methods of KYC verification. Just like the indefinite pros of digital systems over old manual processes, online KYC check makes life easier, and security tighter.
Convenience
Convenience is the biggest need of the people today. With an incessant dependence on technology, anything that requires the public to step out of their comfort zone, becomes hard to profit off of. Therefore, online KYC allows customers to verify their identities, in seconds, right from the comfort of their homes or offices.
Speed
Speed is everything in the digital era. With online KYC improving at exponential rates, one of the key improvements is in its processing speed. This KYC digital is much faster than traditional KYC methods and adds to the convenience of customers.
Accuracy
The current global population is over 8 billion. Of these people, about 76% have digital payment accounts. With such an increasing number of people using digital payment systems, the need for specific and accurate security measures becomes indispensable. Online KYC solutions make use of latest technologies, such as facial recognition and AI to verify customer identities with high accuracy.
Security
Today, everyone who has a digital identity is at risk of identity theft, and while ID theft is a critical issue, it is not the only one. For example, issues relating to KYC can result in data breaches, financial crimes, major scams, and others. Through online KYC solutions we can help businesses protect themselves and their customers’ data from all sorts of fraud and other threats.
Evolution of Online KYC check through examples
- In 2015, PayPal launched a new online KYC system via its app. This allowed the users to verify their IDs from their comfort spots simply using phone cameras.
- In 2021, Stripe launched a new program called Stripe identity as a programmable method for ID verification. To elaborate, this involved government IDs, selfies, and encrypted links for high risk transaction tracking within companies.
- A 2022 report from the UK states that over 72% financial firms in the UK make use of machine learning. Furthermore, the number will expectedly increase by 3.5 times over the next three years.
Conclusion
Online KYC is an easy, quick, specific and accurate way to verify customer IDs. It offers unparalleled safety and security. As the financial landscape continues to evolve, online KYC become even more important in the years to come. Furthermore, with new technologies and solutions developing all the time and that too very efficiently, everyone wants to make use of them. Today, businesses that want to stay ahead of the curve must stay updated about online KYC solutions to improve the customer experience and also to comply with KYC regulations.
