The banking and finance sector is one of the most sensitive sectors in the world. The data shared by banks and other financial institutions have to be highly confidential, including personal information about their customers. In addition, many money transfers occur daily in this sector, making the need for security even more critical. KYC identity verification is a solution that can help achieve better compliance management and streamline workflow processes within organizations of all sizes.
Eliminate Fraudulent Transactions
KYC identity verification is the process of verifying a customer’s identity. It helps eliminate fraudulent transactions and prevent identity theft, money laundering, and terrorist financing. KYC (Know Your Customer) has become imperative for financial institutions to comply with regulatory requirements. This process helps in creating an accurate record of customers’ identities as well as their risk profiles.
McKinsey & Company, in its recent KYC Benchmark Survey, reported that a threefold benefit impact was seen by banks that boosted end-to-end KYC process automation by 20%. In addition, they saw a 13% overall boost in their quality assurance ratings. Thus, it is evident and substantial that banks and financial institutions take measures to ensure a good compliance program.
A compliance program adheres to these regulations and protects its business from fines. These could be imposed by regulators or legal actions against them by disgruntled customers who have been victimized by fraudulent transactions. Also, those affected due to other banking crimes such as money laundering or terrorist financing.
Improved Compliance Management
KYC is a mandatory requirement for all financial institutions. It helps them comply with the regulations, anti-money laundering laws, anti-terrorism funding laws, and KYC laws. In addition, banks and other financial organizations conduct KYC checks on consumers to guarantee compliance with these rules.
The process involves collecting information about the new customer, including their name, address, date of birth, or further details that can use for identification purposes. The information is then verified against records held by government agencies such as credit bureaus or credit reporting agencies to determine whether there is any discrepancy.
Also, it’s crucial to know your customers and keep fraudsters out, for which you can avail of an identity verification solution with the help of companies that offer this solution. For example, companies like Au10tix have a robust code of operations and are quick in action. Moreover, the AU10TIX’s KYC identity verification allows for maintaining data privacy while following KYC and AML rules.
It is well-known that managing the identity verification process is highly time-consuming and expensive. It requires the involvement of several people, including the account opening team, legal department, compliance officer, and other personnel responsible for verifying each individual’s identity. However, with the help of KYC technology, this entire process can be made much more accessible. It will reduce the number of steps involved and makes it possible for one person or an organization to carry out all these tasks alone.
Furthermore, KYC technology also helps streamline the workflow by reducing manual efforts and providing an automated solution. This solution works 24×7 nonstop to ensure the accuracy of data collection and verification processes. As a result, it enables banks to offer faster services without compromising on quality control measures. These could be the likes of authentication checks against databases related to fraud/identity theft, thereby improving customer experience while keeping costs under control.
Security of Data
KYC helps to secure data and is a process in which the identity of customers is verified before doing any transactions with them. It can do it by providing a secure and reliable platform for sharing data with authorities who need it for investigation purposes. However, these data collections are susceptible and confidential, so they are only given on an ‘as-needed’ basis.
The process includes collecting information from individuals and corporations and other documents like utility bills, driving license numbers, etc. All are sent through secure channels provided by companies.
Effective Risk Management
According to Deloitte’s survey conducted in 2019, a quarter of businesses spend between $10 and $25 million annually. In addition, about 40% of them spend between $25 and $50 million per year on risk management. With huge investments in them, it thus makes sense that risk management holds the utmost significance for many organizations. With that said, KYC identity verification benefits the banking and finance sector. It helps in effective risk management and safeguards them from harmful security threats.
The customer due diligence process is an important step that helps banks understand their customers’ financial profiles, creditworthiness, and other aspects of risk. It also helps identify potential frauds or suspicious activities related to an account holder or individual customer.
The second significant benefit of KYC identity verification is that it helps with identity verification by verifying whether the details of a person regarding their identity are valid. As such, banks can build more trust with their customers. Knowing that they are dealing with genuine people who will not cause any harm to them financially or otherwise is a huge plus.
In addition, it reduces the chances of wrong transactions. These could be money laundering operations through bank accounts established using fake credentials provided by scammers. They can impersonate real customers who may have lost their original documents.
The third benefit of KYC Identity Verification is Customer Onboarding which means onboarding new customers into your existing database. So as not only to keep track but also to allow future access control on a per-case basis if needed. It also ensures compliance with regulatory requirements both locally and globally.
Better Customer Engagement
The KYC process involves verifying the identity of customers applying for a financial product. It is done by collecting and storing personal information. The stored data is then used to identify customers when they want to use a service or product.
By storing this information in one centralized location, it becomes easier for businesses to access it when needed without having to go through lengthy processes of verification at each stage. For example, if you applied for credit card services today and later applied online for an auto loan. You would already be considered verified. So now all that’s left is sending in your documents which speeds up the process significantly.
Increased Transparency of Transactions
The KYC process has been instrumental in verifying the person is who they say they are and verifying their identity. It stands for Know Your Customer, which refers to a business organization’s collective set of actions to establish and maintain its relationship with its clients and investors. These actions help the organization build trust with its customers and investors through transparency and heightened security measures.
A comprehensive KYC framework collects information about customers and suppliers across organizational departments. Thus cross-referencing it with external sources for further validation, thereby maintaining transparency.
KYC Identity Verification is Perfect for Banks and Finance Companies
Banks and finance companies want to avoid the verification issues that arise by having a KYC identity verification process. The most important thing is to have a strategy that can be quickly implemented, so it doesn’t cause delays for those involved. The idea is to put everyone on equal footing and ensure no one gets left out of the loop in their documentation and verification.
It ensures that all transactions are legal and prevents fraudsters from posing as someone else when transacting with your bank account. It’s crucial as fraudsters could access more information than needed, such as those made through debit cards or checks, etc. Thus it is worth noting all the dangerous possibilities and using KYC Identity verification to protect and be safe from them.