Importance of KYC to FinTech Companies
Just some time ago anyone with an idea and some seed funding could start a business. Income from unlawful activities can be redirected into legitimate businesses. However, to eradicate these growing threat governments around the world have stricter rules and regulations these days. New startup’s needs to undergo stringent due diligence processes which includes declaring the source of the funds, records on the past business practices et cetera. There is also compliance related aspects that need to be considered for a new startup. This includes Knowing Your Customer!
Many of you are well aware of this term “Know Your Customer” also known as KYC. To explain this briefly it’s safe to say that its a government regulation which was designed to prevent unlawful activities such as money laundering, organised crimes, financial crimes, terrorist financing etc.. This requires individuals to whitelist their records by providing government registered documents such as passport, national ID and other documents to screen their records. Many financial institutions, insurance companies and service industries outsource this service to well known companies who specialise in providing KYC services. VeriME is one of the blockchain based Digital KYC providers who provides services to many such clients. One of them is Maritime Bank, one of the largest banks in Vietnam using VeriME platform to provide D-KYC services to their customers. As part of compliance requirements as mentioned earlier let’s look at the fintech industries and the importance of KYC to fintech companies.
Everyone is talking about Fintech. What exactly does it mean? Fintech, the word is a combination of financial technology written in short form. It simply means the financial technology which is used to improve and automate the financial operations and processes used by business operations to improve its offerings to clients on a secure and more effective manner.
There is a huge and growing acceptance to fintech startups. However, there are many challenges faced by these startups. To be successful it’s not only important to have the experts to manage customer acquisition, cash flow rate, reduce cost of customer acquisition so on and so forth, It is also crucial to have an in-depth knowledge and expertise on the importance of Know Your Customer (KYC). KYC has a vital role in complying to today’s regulatory compliance. To simply put, KYC is a multi faceted subject where it involves a series of data driven processes. It is important to understand how KYC applies specifically to their respective business.
In most countries KYC is part of the law where companies are requested to verify the identities of their clients, board of directors etc. This process is taken seriously to eliminate issues arising from criminal activities. To explain further this process will allow fintech startups to obtain information regarding their potential customers track record that ensures that they were not involved in criminal activities and other frauds. It will also ensure a person is who they say they are. For example, an individual in Malaysia who want to perform the D-KYC using VeriME platform will be requested to scan documents such as the government registered identification card, passport details and other details such as address, before companies can whitelist that person. These Requirements are based on each business and the information required for their business undertakings in their respective countries or business operations. KYC service providers like VeriME customises these rules based on each business and their requirements making it a target driven KYC screening. KYC evaluations may also include risk profiling, screening and due diligence, AML checks, PEP checks and transaction monitoring. KYC also has a very close connection and makes a part of the larger picture of Anti money laundering (AML) process. By setting up a strong KYC system fintech start-up’s can concentrate on growing their business instead of worrying about other issues related to government regulation and other criminal threats.
KYC is also helpful in acting as competitive factor where it allows fintech start up’s to gather insightful data on customers that they deal with. This data is secure and allows organisations to target the right customer for the right product and services. This focussed driven data analysis can benefit the organisation to grow faster and generate profit.
With many issues involving digital crime and etc. regulatory authorities are always on the lookout for organisations who fail to comply to these rules. New fintech startups are usually the easy target. The tendency to overlook the compliance requirement is highly possible in new startups. There are also instances where new startups try to cut cost and opt for a cheap service provider who may not be able to provide them with a good solution. This means hefty fines and trouble to settle in the long run.
Currently the market is flooded with many KYC providers. Getting an appropriate service provider who understands what is required for a fintech company will be very useful to get away with unnecessary problems in the long run. With good experience in KYC solutions VeriME is able to provide the right services that focuses on each fintech business.
