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What is Know Your Customer (KYC) software?

KYC. Unmask Them Digitally

The banking industry is highly influenced by Know Your Customer (KYC) bank regulations. But whatever the sphere you operate in – customer intelligence is the cornerstone of the matter.

For corresponding Know Your Customer obligations, your business needs a solution for identity verification that is convenient to your customers and ensures protection for your business. What is KYC meaning? And how can you apply it for your benefit? These are the things on sale in the article.

What is KYC?

KYC (Know Your Customer or sometimes Know Your Client) is a practice of identity verification of the clients in compliance with legal requirements and current regulations and laws. In addition, Know Your Customer coupled with Anti-Money Laundering (AML) is a powerful tool to detect fraud and fight against financial crimes.

Know Your Customer compliance procedures can be performed both offline (personally) or online (impersonally or remotely):

  • Offline procedures include downloading by customers the onboarding applications, filling in physical documents, signing and submitting them along with necessary copies of the required IDs and paperwork.
  • Online procedures imply uploading by customers the required documents and filling them in with the details in an online form. The verification of documents is made by manual reviewers who get in contact with a customer to finish the process.

How to automate knowing your customer?

In recent years, companies, banks, and organizations are pursuing the goal of transformation and digitization of processes that seem challenging to automate and get remote, including KYC. A coronavirus pandemic outbreak accelerated the process greatly. However, specialized software has appeared to help to achieve this task. By using cutting-edge technologies such as artificial intelligence (AI) and machine learning (ML) Know Your Customer due diligence can and will be automated. 

Automated KYC verification exploits advanced AI and ML technologies to ensure that your clients meet legislative and regulatory standards with no high dependency on internal resources. 

The automated process consists of the following stages:

Although end-to-end KYC processing still requires human resources to make crucial, high-level decisions, a majority of the routine checks can be handed off to automation, and more specifically, Intelligent Process Automation (IPA). 

Intelligent Process Automation is a set of technologies combining management, automation, and integration of digital processes. Some of the technologies that IPA consists of:

  • Robotic process automation (RPA). The use of robots that can imitate humans’ behavior and handle repetitive, high-volume tasks.
  • Intelligent document processing (IDP). The type of IPA has technologies like machine learning, Intelligent character recognition (ICR), and Natural language processing (NLP) to process and select data from large amounts of documents.
  • Artificial Intelligence (AI). It analyses data in a specific way, recognizes data patterns, and learns from past decisions to make increasingly intelligent choices.

The technologies mentioned above are now used for workflows automation, data extraction from documents, and reduction time for screening, identification, and verification.

KYC automation benefits

Due to the advanced Artificial Intelligence and Machine Learning technologies, processes of onboarding customers can be substantially improved and digitized. Know Your Customer software solutions make the process seamless and frictionless. Customers have no difficulties accessing the contracting of products and services remotely in a secure way in all industries, including banking.

The key benefits of Know Your Customer automation:

  • Reduced costs. KYC processes enhanced with automated solutions reduce customer onboarding costs by 70%. Automation of Know Your Customer requirements compliance in banks reduces costs significantly by eliminating errors in data entry thus avoiding severe non-compliance fines and increasing the customer onboarding efficiency.
  • Increased efficiency. Fully automated verification of identity enables customers to create their digital identity to check it instantaneously. Automated solutions have the unarguable benefit of running 24/7 with no day-offs. This cuts off up to 80% of the time for onboarding and allows financial institutions, banks, and other businesses to essentially increase their number of onboarded clients.
  • Risk minimization. By automating Know Your Customer banking regulations compliance end-to-end, you minimize the risk of errors in data-entry mistakes or oversights. The reduction of manual intervention into the Know Your Customer rules compliance also significantly reduce data breaches and security threats. You keep customers’ data safe and your business compliant.
  • Scalability. It costs many human resources to scale manual KYC practices. And it is next to impossible to adapt to the frequent changes in Know Your Customer banking regulations, external threats, or internal changes. AI-powered software solutions are at service 24/7. They are easily adapted to external requirements fast. No interference or downtime occurs to integrate them into business infrastructure.
  • Improved customer experience. The automated KYC process provides customers with a frictionless experience by eliminating the futile back-and-forths between customers and banks when additional information or services are required. Using an automated process, customers get fast accreditation or identity verification experience. Banks, at the same time, can open accounts, process loan applications, or approve loans quicker (see our case study “How We Helped To Implement Instant Bank Card Issuance In Two Taps”).
  • Extra free capacity. By eliminating the necessity to perform routine, repetitive tasks manually, you save time for your staff. They can focus on customer-centric activities, for providing high-level services, and be involved in high-risk cases. Employees’ engagement and retention increase when they are empowered to use their creative abilities and talents on higher-value tasks.

Only when KYC process becomes global, standardized, portable, user-owned, and supported by digital credentials, KYC will start getting less expensive and difficult to deal with. It will ease doing business because location, borders, distance, and time zones do not impact the whole process.

Denis Stolyar
Head of business development

KYC. What’s behind the curtain?

Alongside the Artificial Intelligence and Machine Learning used to know your customer automation, there is a tendency of KYC evolution towards electronic KYC (eKYC).

The term “eKYC” is used to describe the digital, electronic, and online conception of KYC processes. eKYC is a remote, paperless process. It minimizes costs, time and natural bureaucracy necessary in KYC processes even more than automation does.

Though for some, verification of customers is still mostly a paper-based check with Know Your Customer forms to fill. The ways eKYC can improve your customer verification process are evident. Literally. 

Video KYC allows verifying clients’ identities via video calls. Customer identity can be approved either by ID demonstration or via facial biometrics programs combined with fingerprint analysis. The only thing a customer needs is a mobile phone with Internet access. 

The process looks as follows:

Some companies and banks are interested in eKYC as a means of collecting customer data. While analyzing social networks and customer behavior there, valuable data is extracted. It is further used for credit scoring or potential client’s financial activities analysis.

The main benefits of eKYC are:

But fishing and identity or signature falsification are very common now. Special businesses dedicated to technical compliance solutions exist. They ensure you have completely secure eKYC processes with zero losses for these counterfeiting offenses and related crimes.

Conclusion

For highly regulated industries like banking, it can be extremely complex to onboard new clients. Fortunately, the implementation of digital solutions for automation of the process provides financial institutions with a myriad of advantages and benefits at a much lower cost than traditional approaches do.

The correct KYC automation implementation can:

  • reduce costs;
  • boost efficiency;
  • save human resources;
  • help to ensure regulatory compliance;
  • attract clients due to process convenience.

For more details on the KYC solutions, get in touch with us.


Sergei Artimenia

Director of Business Development

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