Know Your Customer: Know Who Your Digital Customer Is

Know Your Customer (KYC) is a term used in the business and financial sectors to refer to the process of verifying a customer’s or client’s identity and other relevant information. In most cases, the purpose of KYC is to check whether a customer can meet their payment obligations when entering into a financial commitment. For example, when taking out a device loan with a phone subscription, or when applying for a mortgage. 

In the banking sector, KYC is used to prevent fraud, money laundering and other illegal activities by ensuring that the person or organization being dealt with is legitimate and is not involved in criminal activities.

KYC regulations are usually enforced by financial institutions, such as banks, investment firms and other financial service providers. They are also enforced by government agencies responsible for regulating these sectors, and by commercial parties that need to accept customers. The Know Your Customer process usually involves collecting and verifying various types of identification and documentation data, such as government-issued IDs, proof of address and other relevant information.

Also read the blog: Security and platform development for governments: challenges and key considerations

In addition to being a legal requirement, KYC is also seen as an important best practice for companies and financial institutions to protect themselves against possible fraud and other risks. By financially assessing their customers and ensuring they are legitimate, companies can help maintain the integrity of their operations and avoid legal and financial penalties. It also helps prevent high costs related to customer non-payment.

More and more identification options in applications

As the world becomes increasingly digital, performing an identity check is also becoming more challenging. More and more companies are therefore using digital identification and verification technologies to streamline their processes and provide their customers with a seamless experience. This may include the use of biometric data, such as facial recognition or fingerprint scans, to verify a person’s identity.

Such technologies are used not only internally, for example to verify employees’ identities when accessing secure buildings or networks, but also externally, for example when applying for a driver’s license or taking out a mortgage.

Although these technologies offer many benefits, such as time savings and convenience for customers, there are also concerns about privacy and data security. It is therefore important that companies take the right measures to safeguard the security and privacy of their customers and ensure they comply with applicable laws and regulations relating to data protection and identity verification. This is where the concept of Self Sovereign Identity (SSI for short) comes in.

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