Do you know what KYC means? It is a methodology that prevents and combats possible financial fraud through identity verification. Not all companies are aware of this type of technology and in a study conducted by KPMG In 2020, more than 200 managers of Mexican companies were interviewed and it was revealed that the 67% considers that the mechanisms to mitigate the risks of fraud and other financial crimes are insufficient.
For this reason, it is vitally important to implement technology and what KYC (Know Your Customer) means, since identity verification can solve many vulnerability and cyberattack problems. that the tech industry is currently going through and can even help you avoid many sensitive legal processes. Especially, it can be your best tool for the use and management of data and sensitive information, both from your clients and from your work plant.
Digital identity authentication services help companies improve trust between partners as well as customers and thus increase conversions, making this process the number one step towards a more secure future for your business. business. Investing in security is always the best option. Any misstep can have serious consequences, including identity theft. For this reason, it is important to incorporate this type of technology with the support of Codster which stands for KYC (Know your Customer).
But what is KYC or Know Your Customer? To know what KYC means, you must understand that these acronyms represent the phrase in English "Know Your Costumer" ("Know your client"). It includes verification through identity documents, face reading and file recognition, such as your proof of address (utility bill).
In general terms, the identity verification offered by this technology guarantees that the person behind an electronic process is who they claim to be, in this way fraud and identity theft through different processes. The companies carry out the validation of the sensitive information of their clients in compliance with the requirements and laws of the different countries in which they have a presence. A more automated form of KYC is now called eKYC, which means it is a paperless version of identification.
Put very simply, what KYC means is a procedure carried out by various organizations, especially banks and financial institutions, to prevent fraud and criminal activities through the identity validation of their clients. The importance of implementing these processes for organizations can be costly, some of them continue to pay compliance fines for data breaches.
The list of online crimes is endless and many argue that data is the greatest asset. Any misstep can have serious consequences, including identity theft. For this reason, it is essential to assess and onboard only trusted customers with the support of Codster through identity verification.
What does KYC mean?
As we mentioned earlier, what it means KYC Know Your Customer and it is a methodology that is applied when an organization wants to register a new client. Your goal is verify identity of clients safely and respecting the rules that regulate this practice, that is, without violating the confidentiality of people.
Compliance with this type of identity validation requires asking clients for certain important documents and identification proofs to verify that it is not a bot (controls and verifications) that will be contrasted with information stored in trusted organizations, and thus avoid the consolidation of business relationships with people linked to criminal acts or with false accounts that can cause various problems.
This process can be carried out in person or remotely with the implementation of the eKYC (Video IDentification) methodology and, in general, documents such as an identity card or passport are usually requested, in addition to biometric tests based on machine learning. This last point refers to facial photography, fingerprinting or other similar options.
The importance of KYC
In addition to knowing what KYC stands for, you also need to recognize its importance. The value of "Know Your Customer", apart from allowing a better relationship with customers, lies in the possibility of avoiding the natural risks associated with financial companies, such as money laundering and financing of terrorist actions.
In an era of constant digital transformation and, mainly, within the framework of the pandemic, not only have people's routine habits changed (with the positioning of trends such as teleworking or distance education, for example), but also Crimes have adjusted to this new reality, increasing the frequency and impact they have on companies. In addition, identity verification allows companies to continue a smoother digital workflow that does not interrupt other important processes.
The impact that KYC means translates into several related benefits such as a reduction in paperwork, especially in the validation of documents to incorporate new clients or employees, since it is done more efficiently and without so many complications. Plus, by removing friction in the application process, they will have faster access to your services, which has a positive impact on their experience with your company.
This change of direction that KYC means translates into a good reputation, something that all institutions strive to build, both for their clients and their partners. Customers today are much more careful about their online security, so they only transact with reputable organizations that provide them with security with identity validation processes, so building trust will be essential for them to stay with you for the long haul. One of the best ways to earn their trust is to ensure that the data they have provided to you is kept confidential and cannot be compromised.
In addition, there has been a large increase in financial criminal acts in Mexico and the rest of the world, which has even resulted in the European Union Agency for Police Cooperation (Europol) calling this phenomenon "coronacrimes". The main factors driving identity verification are the digitization of the economy and the increase in fraudulent activities and identity theft.
The latter crime is the fastest growing in Mexico and the world; Only in 2019 caused financial service users losses of 2,965 million pesos, according to Condusef data, which translates into a very important point for the sustainability of companies and makes it essential to understand what KYC means for your company.
For this reason, during 2020, companies had to increase their costs to avoid fraud and economic crimes. According to research conducted by LexisNexis® Risk Solutions, "The total estimated cost of complying with financial crimes in Mexican financial companies is US$900 million per year." The customer identity verification that KYC stands for adds more than just security; also helps to report suspicious transactions. It allows companies to capture more details, such as IP addresses and geolocation, in addition to valuable information. This information can help related companies develop a deeper understanding of an individual's behavior to determine the validity of a transaction and gain insight into their clientele.
Of course, count on Methods of identity validation It brings additional benefits to your business, such as competitive positioning, regulatory compliance, improved user experience, and increased brand image and trust. Also, if the customer identity verification is not implemented correctly, may violate a person's privacy and federal laws, This is something that any company wants to avoid.
Various local data privacy regulations require prior consent and notification to process an individual's information, such as facial recognition and other biometric data to validate their identity through the processes that stand for KYC Know Your Customer. Furthermore, failure to properly verify a person's identity can lead to illicit transactions and potentially lead to heavy fines and even criminal prosecution.
Advantages of KYC or Know Your Customer
Among the benefits that KYC means are:
- It allows institutions to carry out a better risk assessment of their loans.
- Prevents money laundering.
- Limits fraud mainly associated with identity concealment.
- It provides stability and investment to the country, since it generates a safer and less risky financial market.
- The lower uncertainty encourages the institutions to lend to their clients, generating higher profits.
The success of an organization requires that its commercial relations be carried out in a secure manner and protect the identity of its users. Preventing fraud and mitigating financial crime in the mission of technology that means KYC Know Your Customer.
Now that you know what KYC means, we want to offer you a solution for verifying the identity of your clients, which meets your needs. For this reason, we want to invite you to join our identity verification and validation platform for your users in your applications.