The identity and address of customers should be confidential in any business field. To make it simple and easy for those who carry out financial transactions, the KYC process was created.  KYC or ‘know your customer’ is the process of verifying the authenticity of a customer in an effective way. So what is KYC?

What is KYC?

KYC is basically a verification process that helps a company or a bank to confirm and verify the authenticity of their customer. The purpose is to make sure that they are serving a customer with the right identity and address. 

To have a smooth process, companies or banks need their customers to submit their KYC documentation before they start using the services such as opening a bank account, making deposits, etc… through the portal.

KYC check is necessary for every organization, including banks, authorized financial institutions, etc. In general, it’s a one-time process that comes as part of opening an account. 

Why is KYC important?

Because KYC is needed in every financial institution, you need to know why it’s so important. First and foremost, this process ensures that financial bodies are not being used to carry out illegal activities. That means not only KYC can reduce money laundering, but it can also help banks catch any potential money laundering with KYC online verification. 

Secondly, KYC is useful for verifying the legal status of non-individual customers that use financial services like trading. With these customers, KYC helps cross-check their operating address. In addition, it verifies the identities of authorized signatories and beneficial owners. 

Besides, this process can check the nature of the business’s employment, which is extremely useful when you want to verify the authenticity of the individual and/or company. 

Different types of KYC process

So you know the importance of the KYC process, it’s time to learn about its two different types. Depending on your preference, you can choose the right type for your business. And of course, both two types are excellent.

Aadhaar-based KYC

If you are looking for a verification process that can be done online, Aadhar based KYC is the one that you need. All you need is an internet connection, then you can upload a scanned copy of your original Aadhar card for this type of KYC. 

In-person verification KYC

The other type of KYC is in-person verification KYC that is required to carry out offline. If you are choosing this type, your customers need to visit a KYC kiosk to authenticate their identity using Aadhar biometrics. 

On the other hand, if you are not familiar with these verification methods, you can always call an agency to help you carry out this verification at your home or in your office. Some organizations even offer this type of verification via video call where the customer has to show their original Aadhar card and address documents. 

Why do you need KYC?

You now understand what is KYC as well as two different types of KYC verification. In simple words, if you want to have the ability to be involved in any financial transaction, you will need KYC. So why specifically do you need this process as an individual?

As soon as your KYC verification process is done, your business/ organization or bank has successfully received information about your identity, address, and financial history. That helps verify that the money you are using for the transaction is legal and it doesn’t relate to money laundering purposes. 

Also, keep in mind that no organization, bank, or company will allow you to open an account if you don’t do this process. For example, if you are looking to take out a loan, invest in mutual funds, trade on the stock market, or anything else that you are interested in relating to financial transactions, you must carry out your KYC to let them know that you are authentic.

As you can see, KYC not only protects your information,  but it’s also very helpful for businesses and banks. As for mutual funds, you can do in-person verification. You just need to show your documents proving your identity and address when getting on a video call with the KYC executive. 

The KYC verification process should be done once a year unless you need to update new information. As soon as you legally change your name or address, your mutual fund KYC will be updated, along with your verification for other financial transactions.

So you have learned the definition and importance of KYC check. Obviously, it’s crucial to know your customer so that you can provide a better experience for your customer when they use your service. Besides, you can also choose between 2 types of KYC as mentioned above. Let Omatech help you find the right type for your business!