KYC and Online Banking: How KYC Has Become Fintech’s Biggest Achievement

KYC and Online Banking: How KYC Has Become Fintech’s Biggest Achievement

KYC (Know Your Customer) regulations have revolutionized the online banking space and the scope of the fintech industry. In verifying the identity of customers, this regulatory requirement helps in fraud prevention. It also restricts the financial ability of account holders and users who fail to meet specified criteria.

It started as an in-person verification where customer databases were physically updated and account holders needed to visit their local banks with their identity documents. However, it has recently shifted to the digital sphere, bringing many advantages to the fintech sector.

Finance team using KYC solutions

What Is KYC in the Fintech Industry?

KYC is a well-regulated, data-driven process. Financial organizations use it to determine if clients are who they say they are and not of a criminal background. KYC is used to determine if clients may be considered valid account holders and users of a specific platform. It helps quantify and determine the risk of maintaining a business relationship with a client.

It’s a tool used to combat anti-money laundering and financing of terrorism-related activity. It is a legal and regulatory requirement for financial organizations such as banks and insurance companies.

Fintech organizations can assess their clients’ financial status and keep a check on their accounts for any suspicious activity. The American Treasury Department has been advising fintech companies to help the government avoid anti-money laundering activities and financial crime.

Advantages of Online KYC in the Fintech Industry

  • Remote access to clients’ accounts from anywhere around the world. All that is needed is a digital camera-embedded device, an identity document, and your face for verification purposes.
  • Criminal checks within databases can be conducted within seconds and unauthorized access denied as required.
  • Databases are efficiently managed digitally, thereby minimizing the chances of human error.
  • Additional security via the easily navigable voice recognition feature.
  • Real-time non-manual verification and transfer of key client data within a few minutes.
  • Increased client acquisition and decrease in failed customer acquisition.
  • Efficiency for fintech companies and clients with biometrics and video conferencing. This eliminates the need for physical KYC verification and provides quick and flexible access to fintech services.
  • Decreased risk of document loss and paper usage, making the fintech eco-friendly.
  • Perceived as highly innovative versus its competitors, with new regulatory adjustments being introduced. These could include value limits and electronic signatures to complete transactions.
  • Improvement in operational efficiency, profit margins, and regulatory compliance.

The Importance of KYC for Fintechs

Compared to banks, fintech has been seen to be more proactive in digital activity. Their customers do not need to go to the physical office but can use their phones to open accounts instantly.

There is a more urgent need to ensure that KYC regulations are adhered to. Fintechs can be heavily fined if caught not complying with these policies. They need to reduce risk while also increasing their customer base and sales.

To put in place an appropriate process of KYC compliance, fintech needs to determine the risk profile of their clients and the risks involved in their products. The acceptable forms of client identification also need to be identified. Fraud can be minimized by further checks such as geo-location, facial recognition, and a 2-step verification process. Trust between the clients and the fintech organization is key.

Strong business practices ensured by an efficient KYC compliance process can assist in securing this trust. The KYC process can be administered via secure account opening and account maintenance processes.

Client meeting

KYC Is the Largest Accomplishment of the Fintech Industry

KYC has been widely adopted, innovated, and expanded within the fintech industry. It is the biggest achievement of the fintech industry owing to the points below:

  • Potential clients have access to several fintech platforms.
  • The onboarding processes and account opening processes are well-streamlined.
  • Fintech organizations can conduct regular and more in-depth risk assessments and due diligence.
  • Fintech organizations can aim to be better streamlined in maintaining their records.


KYC regulations have improved innovation within the fintech industry, and high volumes of data can be processed effectively by larger organizations. Smaller fintech companies, on the other hand, can employ sophisticated technology to identify and halt illicit funds from migrating to their branches. It can also help in decreasing the increasing compliance cost liabilities.

Fintech organizations are favoring artificial intelligence solutions to facilitate quick client onboarding processes.

The recent pandemic has affected all businesses, and financial companies are looking at novel technologies to help increase sales. Artificial intelligence can help fintech organizations monitor any suspicious activity and use digital KYC to handle new clients efficiently.

KYC has increasingly become the fintech sector’s most significant achievement, helping facilitate regulatory policies. KYC also helps maintain the safety and security of records and data protection of sensitive client information.

Cover photo credit: Rodnae Production / Pexels

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