Emily Clarke

What is KYC?

Online banking services have changed the way we manage money. It's easier than ever to create an online bank account and get everything from gaming payouts to payments for gig work. While the benefits are unmistakable, the digital revolution in banking has opened the floodgates for fraud.

Fraud and financial crimes can cost businesses millions. In 2021 alone, losses reported from fraud increased a whopping 70 percent. To combat criminal activity, companies must comply with KYC regulations.

KYC stands for "Know Your Customers." It's a process that financial institutes and companies must use to verify individual customers' identities. It's a form of due diligence that assesses the risk of working with an individual, identifies suspicious activities and prevents money-related crimes.

How Does KYC Work?

KYC involves gathering identification information about every customer with which an organization conducts business. While it primarily applies to financial institutions, any company sending money to customers or users must comply with KYC laws. If you send gaming payouts, pay contractors or send money to marketplace sellers, KYC is paramount.

Identity verification can include document and biometric verification. Once gathered, that data is run against databases to spot potential issues. But it doesn't end there.

KYC is an ongoing process that requires understanding a customer's intent, monitoring transaction activity and more. KYC regulations aim to prevent financial crimes and alert the proper authorities of known offenders.

Contrary to popular belief, KYC processes aren't optional. It's a legal requirement that ensures your organization complies with anti-money laundering laws. Failing to have KYC programs can lead to expensive fines. Furthermore, it harms a brand's reputation and fosters distrust among customers.

Doing Your Due Diligence

Fortunately, complying with KYC regulations isn't difficult. In the past, companies had no choice but to do those processes manually. But technology simplifies the process and creates a friction-free experience for customers.

Identity verification can create bottlenecks in the customer signup process. But a good API can break up the required steps, making it easier for customers to gather the necessary information without feeling burdened. KYC platforms handle compliance for you, freeing resources and simplifying the logistics.

Author Resource:-

Emily Clarke writes about multiple payment platforms, payouts API, marketplace payouts and more. You can find her thoughts at API Management blog.