KYC verification as a service: Creating a secure online economy

Companies use KYC verification to ensure that users and customers provide information associated with the identity of a real person. Online transactions represent a growing number of businesses, therefore, knowing who is doing business with is a fundamental commercial requirement for companies. KYC verification mitigates the risk of fraud and helps entities obliged to comply with regulations against Money Laundering) and Know Your Customer.

Effective KYC verification solutions also allow companies to offer a user-friendly shopping or integration experience. Customers prefer instant access to the services and products and are most likely to abandon if the process is slow and tiresome. Although people understand and appreciate the need for companies to comply with security, they do not want processes to slow down more than necessary.

Not long ago, KYC verification was only possible through slow manual processes, prone to errors and not suitable for today’s economy. Now, with API add-ons, adding an identity service allows companies to grow faster and get more business opportunities by outsourcing basic functions.

B2C (Business to Consumer) companies face the challenge of building and maintaining an uncomplicated KYC verification experience, a task that requires a significant investment in infrastructure. Unlike the independent acquisition of the necessary data, the development of the required technology and the operation of the basic security and privacy measuring activities on a continuous basis, companies can easily use KYC verification as service as an enhanced security measure.

Use cases of  KYC verification

There are different stages in the life cycle of customer information where KYC verification is necessary or suggested. The first time identity checks are executed is during the incorporation process, when the client is new and the account is being opened. This is an ideal time for verification and to properly perform due diligence, as it is better to prevent illegal activities before they occur, rather than dealing with subsequent consequences.

Another way when performing identity verification becomes important is when there is suspicious activity on user accounts such as password reset from an unrecognized device or the information changes previously registered on the account. These actions are a vulnerable point for the integrity of an account since unjustified changes can lead to the takeover of the account by a stranger. Therefore, before allowing substantial changes to the account, one must ensure that the true account holder is really requesting the change to avoid subsequent losses and reassure the client.

Features of an effective KYC solution

An effective KYC verification solution should have these features:

Global Coverage

As the businesses are undergoing a digital transformation, the online and branchless contact with the customers is becoming a norm and the businesses have to entertain customers from all over the world. In such cases verifying the identity and performing due diligence has become quite challenging because of different document templates and formats in each jurisdiction. That’s why global document coverage is essential for an effective KYC solution.

AML Screening

As the cyberworld and specifically cybercriminals are becoming more sophisticated, verifying the identity of a person is not enough. An effective KYC verification solution should perform AML screening against sanctions list and PEPs to ensure that the individual is not involved in any case of money laundering or terror financing.

Business Verification

The increasing trend of shell companies for money laundering and tax evasion has created a challenge for businesses to verify if the entity they are doing business with is legal or not. Many times organizations have to do business with other corporate entities and verifying such entities with their ultimate beneficial owners is a necessity. That’s why an effective KYC solution should also have the capability to verify businesses.

Real-time and Cost-effective Verification

The cost of compliance is very high and businesses had to pay a handsome amount for complying with regulations. A reliable KYC solution should help a business minimize this cost and should also be quick to enhance the customer experience. AI-based KYC verification solutions are both quick and cost-effective. Automating the KYC verification process reduces extra cost heads involved in manual verification and also enhances the speed of verification process meanwhile eliminating the errors.

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