Before joining an organization, opening a bank account, or even buying a simple daily use product, you would first research the brand, their history, and other information just for the sake of security purpose, well so does the organizations (financial institutions/banks) do.
For banks and other financial institutions, it is necessary to check the profiles of their future clients and the need for such activity has increased with the increase in fraud activities. A platform that could perform this activity for the organizations is very crucial and required. To predict or minimize the level of risk possessed by a client towards the organization a thorough but quick check is required for all the potential clients by all the financial institutions (FIs), this is where KYC comes into play.
Know Your Customer (KYC) might not sound like a foreign term, as most have been familiar with it while using various payment apps (Paytm, Google Pay, PhonePe, etc). This process involves verification of customers based on their photographic ID, proof of date of birth, and address. It acts as a control measure implemented by financial institutions for new or existing customers for verification and to prevent any chance of risk being associated with a customer having a background of financial crime.
It is the process to make sure that the identity a person has claimed to be, is proper and there is no involvement in any sort of illegal activities by them. Certain organizations seeking more information about their clients tends to take due diligence ensuring there is no ongoing. This entire process could be done either manually or electronically, but the manual process takes more time and hence, makes electronic or online medium-fast, efficient, and more reliable.
KYC is at the heart of a safe and secure banking experience for any client or consumer. Since there have been several incidents of identity theft leading to financial crime, the need for KYC has never been felt so much before. To simply state that it is the most essential beginning step towards a better safe and secure financial environment won’t be exaggerating the known.