As the online marketplace becomes increasingly riddled with frauds like identity theft and credit card fraud, the need to prevent them becomes more essential. More importantly, regulators around the world have made it their priority to curb money laundering and other financial crimes. To ensure there is a proper procedure for businesses to deter such crimes, the Know Your Customer or KYC requirements were introduced. Initially, only banks and financial institutes were required to submit to KYC procedures. More recently, however, online businesses have also been included in the net and are now obligated to verify their customers and transactions. 

Web-based transactions have always been risky. As the person on the other end of the transactions is anonymous and harder to identify and thus verify. This makes online payment channels vulnerable to scams like identity theft and credit card fraud. Moreover, for consumer shopping online, they need their services to be fast, efficient and secure. This makes the establishment of an effective KYC framework important for an online business.

What a Basic KYC System Consists Of?

The Know Your Customer or KYC system was built to keep a check on the way a business conducts its financial transactions. Online businesses need to make sure that their customers are who they say they are. Particularly for businesses that process credit card transactions. More recently, credit card companies and banks are requiring businesses to verify their customers properly and implement sufficient measures to detect frauds. While screening customers, businesses are also required to make sure that their platform is not being used for illicit activities. KYC procedure’s for online businesses need to be made more efficient as well as secure. The use of modern technology can help companies establish a better KYC process to ensure they meet all regulations.

Challenges to Implement a KYC System

For a KYC system to be effective and serve its purpose, there are few challenges that must be overcome. Firstly, comes the hurdle of collecting and storing data. Modern tech solutions have made it easier to collect information, but processing it accurately is a different matter. Companies must, therefore, ensure they are implementing solutions that meet the basic requirements for KYC and can effectively store and process data by validating it accurately.

Secondly, businesses must make sure that they are processing information as quickly as possible. Delays in the verification process can be a cause for frustrated customers, leading them to abandon the purchase.

Lastly, the customer experience is an important factor to consider in this matter. If repeatedly asked for more and more documents to verify their identities, customers can end up leaving altogether.

Smart Practices for KYC

At any rate, businesses cannot afford to ignore KYC procedures or make little effort to develop them. A sound KYC system needs a company-wide integration of tech solutions. An efficient system is required that does not interfere with other systems in the company and results in making multiple requests to the customer. Implementing a third-party solution can be a perfect choice if your business does not have the technical prowess or resources to implement a KYC system. Solutions are now available that can meet KYC requirements through document verification and facial recognition.