KYC and Why Does it Matter

In an increasingly digital environment, online payments have become the norm for most customers looking to transact with businesses. At the same time, such transactions can pose a risk to businesses that do not employ an identity verification process such as Know-Your-Customer or KYC.

If this is your first time encountering this term or you are hesitant about going through this process, read on to find out how KYC can help your business transact safely online.

What is Know-Your-Customer

Know-Your-Customer (KYC) is a standard process required in banks and financial institutions. It generally ensures that the entity has complete and verified information about a business before transacting with them. The information gathered accordingly includes the clients’ identity, risk factors, and legitimacy of funds.

Depending on the company’s risk guidelines, compliance to the KYC process correspondingly differ. But regardless, it typically includes establishing customer identity, the nature of activity and source of funds, and ensuring that there is no history of fraudulent transactions.

Typical KYC documentary requirements:

• Individual
  • Government-issued ID
  • Recent photograph
• Business
  • Government-issued business license
  • Certified articles of incorporation

Importance of KYC for Businesses and Their Customers

Fraud and other financial crimes are a growing threat to financial institutions, and having a KYC in place helps in eliminating these threats. Based on a report by BusinessWorld Online, the Bangko Sentral ng Pilipinas is looking to require financial institutions to follow an electronic KYC process to improve customer identification and verification.

Going through KYC is in fact necessary to open a new account in banks and financial institutions in the Philippines. The government added the Philippine Identification System (PhilSys) or National ID as a central identification method. Depending on the company’s risk guidelines, they may require additional information from existing customers based on the client’s risk factors and account. 

In reality, illegal activities may happen unbeknownst to the financial company, which builds the importance of setting proper identity verification and authentication as a layer of protection. Using a KYC process, SwiftPay ensures that all digital payments are safe and secure for their partner businesses using their digital payment gateway.

Advantages of Having KYC in Place

If your business transacts online, KYC is your first line of defense against security threats, fraud, and illegal financial activities. In summary, using it enables you to:

• Filter out scammers. Its verification process leaves zero tolerance for fake identities.
• Avoid reputation damage due to financial crimes. The extra layer of screening prevents dubious entities from using your business that lessens the risk of security threats.
• Ensure all transactions across the platform are legitimate and safe. In effect, it protects the interest of your clients/business partners.
• Protect customer information. Customers and businesses are assured that their details are only used in the authentication process and never for any other purpose.
• Have easy access and convenience for your business and customers. Clients can in fact go through the process online like what SwiftPay is offering.
• Establish credibility.

In essence, security is of utmost importance when it comes to online payments. For this reason, check if your partners have a KYC process in place before entering into any business transaction with them.

SwiftPay executes a standard KYC process in compliance with the BSP guidelines and the 2001 Anti-Money Laundering Act. This helps ensure security and fraud prevention for all merchants and shoppers. Whenever you’re ready to try SwiftPay, you can sign up for a free product demo through this form.