Every day, you are asked to identify yourself, multiple times. Whether you are logging into your trading account, taking a flight or marking your attendance at work, your identity is what unlocks all doors for you. Even your phone asks for your ID when you tap it first thing in the morning.
Despite the importance of verifying one’s identity, it is still treated as merely a necessary compliance measure. Most businesses don’t pay much attention to adopting stringent identity verification processes unless something goes wrong. Picture this: You diligently get your customers to fill a KYC form and yet a bunch of bad actors somehow slip inside so now you are trying to add more checkpoints, making your good customers bear the brunt. Your competitors may start looking a whole lot more attractive then.
For any business, it is essential to determine whether you can trust a potential client. Therefore, customer due diligence is a critical element of effectively managing your risks and blocking criminals and fraudsters.
What is KYC?
KYC is an acronym for ‘Know Your Customer’, a term commonly used for Customer Identification and due diligence. It is usually undertaken to establish a customer’s identity and assess money laundering risks associated with them. The essential three components of KYC include the name, date of birth and residential address. These details must then be supported or validated with an official document such as a passport, driving license, or national ID. KYC verification also includes matching client data against fraud prevention protocols to check for any red flags. Nowadays, the customers are also investigated for involvement with Counter Financing Terrorism (CFT). Based on the findings and resulting information, the businesses assign a suitable risk rating to the customer
Why is KYC essential?
1. To ascertain the identity and location of the potential customer and to understand the nature of their business
2. To classify their risk category and define what type of customer they are.
3. To continuously monitor spikes in unusual activities and keep a track of customer's location.
How to validate your KYC?
For validating their KYC, a customer requires to submit an ID and address proofs such as passport, driver’s license, voters ID, Aadhar card or a copy of their bank passbook. There are two ways to submit these documents.
Offline: The customer is required to download the KYC application, fill in the details in a physical document, sign the document and submit it to the specified authorities along with the attested copies of the required documents.
Online: Fill the form and upload it with the required documents.
Current Workflows Challenges
Whether you submit it offline or online, these documents and details are mostly verified by manual reviewers who will, depending on the image quality of the documents, match them with those in the government database to complete the process.
This process poses many challenges:
1. Time Consuming
The process of verifying documents is a time-consuming process and requires manual reviewers. The customer has to upload documents, fill in the required information and wait for the verification to be successful before he can get onboarded. Typically, this process can take anywhere between a few days to a few weeks.
2. Possibility of Fraud
Unlike machine learning that can often be more effective at uncovering non-intuitive patterns or subtle trends, detecting bad actors manually requires reviewers to understand image manipulations, legitimacy of information extracted against various databases and be sure whether a customer's photograph or a signature is fake. Here, the chances of human error is high.
3. Customer Churn
Having to go through a long process of uploading documents and getting verified lead to customer drop-offs. Often, a bad image can delay the verification process by days or weeks. If the process takes more than a week, it will impact your customer onboarding numbers.
A process that takes long, can still lead to errors and you’re likely to block a lot of genuine customers.
The Right KYC and Identity Verification Process
The right KYC experience is an essential part of your customer’s onboarding journey and can make or break your business. But why does a customer, who probably has his digital footprints everywhere, needs to undergo identity verification checks each time he applies for a new digital product or service? The answer is simple — to check for identity fraud.
Existing KYC vendors haven’t updated themselves to the twists and turns of the fraud landscape and aren’t equipped enough to undertake the challenges of fraud along with frictionless customer experience. You need a KYC process that accomplishes the following:
- Filters out bad actors
- Acquires the right customer data
- Spots stolen identities
- Speeds up customer onboarding
- Decreases manual reviews
Simply put, it’s about getting your customers to provide as much information about themselves without putting them through more checks. You need a fraud detection tool that will additionally verify them in the background with the help of your customer’s digital footprints. The solution should be able to reverse your legacy vendors’ poor identity coverage, false rejects, and low customer approval rates without having to review it manually.
With Bureau, it is easy to ‘Know Your Customer’ thoroughly while managing fraud prevention and security. By pairing KYC with Bureau’s risk scores via data from user inputs, device, behavioural history, and other digital footprints, we let you piece together your customer’s identity and provide a reliable picture.
How Bureau Verifies Your Customers
1. Onboards and verifies customers in real time. User-friendly technology ensures that the customer just needs an ID and a smartphone.
2. Assimilates data points from email, phone, IP address, telcos to create risk-profiled identities denoted by a ‘Risk Score’.
3. Face match & liveness check done with the help of Artificial Intelligence.
4. Checks if documents are available in public domains leading to chances of being misused or fraudulent.
5. Automates manual reviews and regulatory checks, drawing a more comprehensive picture of the user by verifying the details with official databases and Optical Character Recognition (OCR) which checks the validity of the following documents uploaded by a user:
a) Driving Licence: Checks if the date of expiry of the license is accurate or not.
b) Passport: Checks if the MRZ code conforms to the prescribed format.
c) PAN Card: Verifies whether the PAN number conforms to the prescribed format, and letters in the PAN number are uniform and accurate.
d) Aadhaar: Checks if the Aadhaar Card number is in the prescribed 12 digit format and calculates the checksum according to the Verhoeff Algorithm for errors and fraud.
Bureau's AI models are constantly evolving to become better with more data and technology, thereby projecting accurate results. Therefore, with the right identity checks in place, you can know your prospects better, convert customers faster, and grow your business. To know more about Bureau's solution click here