Knowing your audience is key to everything you do. It’s impossible to sell a product or service without targeting it to a particular group. But how to determine who would be interested in spending their money on what you have to offer? One may just guess, but thorough research is always a better option. Let’s find out how to do it effectively and what KYC service providers to use in order to market successfully.
Table of contents
- What KYC is and why it’s important
- Manual vs automated KYC
- Choosing a KYC solution provider
- Top KYC services providers
- Wrapping it all up
What is KYC and why it’s more important than you might think
KYC, a short for Know Your Customer, stands for one of the most important aspects of marketing, especially in the case of FinTech and financial services. The guidelines that KYC service providers can help create are necessary to verify identity, suitability and risks involved with getting to the customer and maintaining relationships with them. But that’s not all. The official, main objective of them, is preventing the businesses from being used in money laundering activities. The global anti-money-laundering and anti-terrorism regulations are clear about that.
In fact, KYC service providers let you conduct an audit which is a mandatory process that all financial institutions must perform when they get a new client and then periodically. Banks may even refuse to open an account or stop a business relationship if the client/customer fails this check. It is especially important in times of crisis, like right now, when criminals try exploiting people in need. During the initial KYC check, the financial company confirms they know who is requesting the service and detects personalities who can be potentially fake. It’s more than just cybersecurity.
Manual or automated KYC?
KYC can be done manually or automatically. In the first case, an employee of a financial institution has to personally check databases for information and, obviously, in the latter case it is done by specialised software. Interestingly, few of the checks are performed with dedicated, modern tools, according to a survey conducted by knowyourcustomer.com. Whatever the reasons are, fact is there are serious delays in the digitalisation of KYC compliance.
In fact, a 2019 study by Know Your Customer (see graphic below) revealed that 37% of surveyed compliance professionals still relied on a “fully manual” or “mostly manual” customer onboarding and KYC process, while 29% of respondents described their KYC procedures as “50% automated and 50% manual”.Source: https://knowyourcustomer.com/new-normal-kyc-compliance/
How it’s done
The general algorithm of how an automated KYC solution works is simple:
- Identification – when a customer creates an account on your platform
- Drop-off – when the documents are uploaded for verification
- Document checking
- Optional – when there are problems with the documents, the system asks the customer to re-upload them two times. If the problems persist, manual verification is needed.
- ID checking – verification if the customer’s statement data and ID documents match
- ALM-CFT screening – checking if the customer is on any list of politically exposed persons or on a santion list.
- Payment – after everything is clear, the customer makes the payment
How to choose one of many KYC service providers
Building a bespoke KYC solution is very expensive, time consuming and challenging, only corporations and large scale companies do it on their own. The rest of the market relies on ready-to-use technologies. But how to choose the right one? After collecting a number of potential candidates, answer the following questions.
- Not all providers are global. Does a chosen service support your country?
- Does the provider offer a sandbox environment?
- Where does the provider store the data? Some countries have data residency laws and require the servers to be located there (for example, the UAE.)
- What data aggregators does the provider use?
- Is it easy to integrate your systems with the service? Are there any technological limitations?
Top KYC solution providers in Europe and the UK
After we’ve found out what KYC is and what to look at when choosing a provider, let’s take a look at the most popular solutions.
LemonWay is mainly an operator of a payment system dedicated for marketplaces, so the company has a track record in managing KYC issues. This is why LemonWay decided to offer a dedicated KYC solution.
This provider has two tiers of such systems: instant KYC for individual accounts and one for corporate accounts. LemonWay cooperates with Ariadtext, creators of cutting-edge OCR technologies which allow for instant reading of all documents and comparing them with data in aggregators.
What is great about LemonWay, is the fact that if you decide to integrate their payment system with your service, you get the KYC with no further work needed.
IDnow is a complex set of tools developed in Germany and working in over 193 countries of the world. It’s a real powerhouse allowing for ID verification, video online identification, digital documents signing and self-service check. Because IDnow’s set of tools is so versatile, it’s extremely popular among international clients, such as crowdfunding platforms and financial apps. Let’s break down the product list:
- IDnow Autoldent – an AI-powered identity verification for users all over the world
- IDnow VideoIdent – for high security requirements, AML-compliant verification via video-chat, backed by AI-technology
- IDnow BankIdent – AML-compliant, secure identity verification through a simple bank transfer
- IDnow eID – NFC-based identity verification for the new German ID card with easy data scanning via smartphone.
Besides the tools mentioned above, you can use additional features in the form of add-ons:
- eSign / Electronic signature – speaks for itself, used for signing documents, for example contracts
- Proof-of-Address Validation – used for verification of the actual place of residence of a customer, basing on scans of documents uploaded by the user
- Archiving – high-security data centers located in the European Union are used to ensure a high level of data protection
Shufti Pro focuses on providing KYC solutions to six industries:
- Financial services
Verification of more than 3000 types of identity documents and assessing associated risks by credit/debit card authentication, PEPS and sanctions checking, MRZ verification, PCI compliance and card-not-present authentication.
- Peer to peer economy
KYC for sharing services, so trust between parties can be ensured. Verified aspects are: criminal and counter terrorism check, pasport, driving license and address verification and GDPR compliance
Not exactly video games, but rather casinos, betting platforms or online poker. Such clients minimise risks by using card authentication, ID and age verification, as well as criminal related check, and biometric consent.
Regulations for crowdfunding services are very strict and they are going to change soon, thanks to the EU, but Shufti Pro takes care of everything. The most important processes involved here are: address and age verification, geo-location and IP assessment, PEP and Financially At Risk Check and excluding customers from restricted countries.
It’s not that easy to get an anonymous SIM card nowadays and telecommunication operators need to obey a very strict set of rules when registering a new customer. It’s easy with Shufti Pro, as the system takes care of everything: MRZ and national ID verification, age verification and Geolocation and IP Assessment. It can even read customised ID documents.
Online booking, reward points, ticketing platforms and flights – the whole industry not only records and processes large quantities of sensitive information, but also must be very careful for security and terrorism-related reasons. Shufti Pro’s dual document verification process provides complete coverage for verifying travel documents from all countries, as well as securely verifying credit/debit cards during online check-outs.
Wrapping it all up
Knowing that KYC procedures are in many cases required by law and that conducting them manually is extremely troublesome, automated systems are a go-to solution for FinTech. Which one to choose? It only depends on your needs and budget, but don’t worry – you can’t make a wrong decision, as long as you stick to the seasoned systems that have been long on the market!