Knowing your ideal customer is one of the most fundamental aspects of starting any business, but for those in the financial sector, it’s a regulatory requirement.
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What are KYC Checks?
Know Your Customer (KYC) is part of the process of verifying a customer’s identity. Most regulated financial markets require organisations to perform KYC checks in order to authenticate an individual.
Qualifying organisations need to verify who their customers are before they engage in a business relationship; typically, customers are required to provide credentials such as ID documents in order to use a company’s service.
These checks help companies meet KYC & AML regulations and reduce fraud. Here are some of the regulated markets which are required to perform KYC checks:
- Finance & Banking
- Payments & Digital Money
- Gambling & Social Gaming
- Retail Finance
KYC policies have been expanding for some time and have become very important globally. KYC allows companies to protect themselves by ensuring that they are doing business legally and with legitimate entities and protects their customers who may otherwise be harmed by financial crime.
Challenges for FinTech Startups
There are many challenges that face startups in every industry; from market competition to cash flow to hiring the right candidates. But depending what industry your startup is in, you may face additional regulatory hurdles to overcome. FinTech businesses starting up in the regulated space need to ensure they practice and maintain regulatory compliance as the consequences can be crippling; some companies have been put out of business by enormous non-compliance fines.
Regulated firms undertaking financial activities are required to apply risk-based customer due diligence measures to prevent their businesses from being successfully targeted by money launderers or terrorist financiers. By conducting thorough KYC & AML checks, businesses can dramatically reduce the financial, reputational, regulatory and strategic risks from other entities. If your FinTech startup is already beginning to onboard new customers, you should consider implementing KYC.
Not carrying out KYC checks when required can result in penalties by the Financial Conduct Authority (FCA) and HMRC. KYC, or performing customer due diligence (CDD), should be performed regardless of whether AML regulations are applicable to ensure customers are who they’re claiming to be.
Many businesses make the mistake that onboarding ends when a user purchases their product of service. The more a business knows about their customers, the more they not only build further trust within their brand but can tailor customers experiences to expand loyalty, improve overall customer lifetime value and obtain revenue retention. As smart business strategy, not knowing your customer in today’s financial world is a non-starter.
How We Can Help
As a startup, spending wisely is paramount to success, so it’s important not to spend needlessly on expensive solutions or unnecessary additional labour.
The cost of KYC compliance has increased in recent years with businesses employing regulatory teams to ensure they remain above board, but the fines for noncompliance far outweigh the outlay; in 2020, regulators issued more than $10 billion in Anti-Money Laundering fines to financial institutions.
Relying on manual processes can eat into your onboarding budget. Manual work requires a human, which takes more time, is more prone to errors, and offers zero visibility which keeps almost everyone in the dark. Customers can’t see the status of their onboarding, which can erode trust and put teams in reactive mode.
Here at Hello Soda, we’ve a comprehensive family of automated, global KYC and AML solutions all working together and delivered via a single API integration. Utilising all forms of data, this integrated approach helps increase pass rates in countries all over the world, which in turn increases revenue and customer acquisition with real-time onboarding, creating a better customer experience.
Our global ID, KYC & AML platform, Sodium, is designed to help save you time and money, streamline your customer journey, automate your onboarding process, reduce fraud and achieve regulatory compliance. One simple integration; a flexible 360° solution which is scalable and secure.
A unique and real-time ID scoring system intelligently verifies identity through a combination of data sources, including digital footprint verification, document authentication, facial recognition matching, liveness verification, live utility data address verification and CRA identity checks.
Utilise a single element or multiple processes – it’s entirely up to you. Learn more about how we can help to automate and simplify your verification processes to help you to learn more about your customers.
Book a demo today and see for yourself how powerful our suite of solutions are.