KYC or “Know Your Customer” is a process of asserting the identity of a customer by an organization or a merchant. This verification process is considered integral, as it involves the customer to produce a set of documents that establishes as an identity or address proof. It is deemed as a legal regulation followed by all the sectors including financial institutions and businesses.
The question of what is KYC and why it is so important can be answered as the importance of these credentials serve as a source of identification of the customer while availing loans, opening accounts, etc. in any financial institution. It is a footstep taken against the rising instances of money laundering, account hacking, and forgeries.
Importance of the KYC process in financial institutions
To know more about what is KYC, individuals need to learn how its implications are important in financial sectors.
The four importance of KYC is mentioned below –
- While availing a credit card, or while opening an account, the customer needs to provide their KYC documents which are now considered as a legal mandate for any lending firm. It helps them ensure and check whether the credit card request or savings account opening request is authentic or at all acceptable.
- Along with the introduction of CVV and PIN as a way to protect your credit card from being hacked, financial institutions have made it a mandated rule for the customers to provide KYC documents while availing a credit card. This process is done to verify the identity of the customers through the data produced as documents.
To curb the risk of credit card theft or frauds, financial institutions like Bajaj Finserv have presented Bajaj Finserv RBL Bank SuperCard, featuring in-hand security and liability cover to lessen credit card frauds. It has several other exciting features tailored according to the benefit of the users.
Bajaj Finserv also provides pre-approved offers that fasten the process of availing credit, thus saving your time. This feature is applicable to several other financial products, including business loans, personal loans, home loans, etc. You can check your pre-approved offers while availing of a loan just by entering your name and contact details.
- KYC documents help financial institutions identify discrepancies that occurred due to an irregular withdrawal of an amount from a customer’s account. It allows an individual to use credit cards wisely as financial institutions can quickly detect and prevent any unauthorized transactions even when performed with the CVV number.
- With a proper hold of KYC documents of every customer, the risk of identity theft will substantially decrease.
- To choose the right credit card, an individual has to provide their KYC documents to their credit issuer, to ascertain the legal status of an individual. It will also help the financial organization to obtain authorized signatures of the same.
Importance of the KYC process in business progress
After getting a substantial notion about what is KYC it is crucial to address the fact of how KYC remediation is essential for business growth. It is vital for all sectors because KYC documents help to identify whether their customer holds any past criminal records or are related to money laundering crimes. A proper history of KYC documents would help the company to regulate a process of screening their applicants and also verify their criminal associations.
Therefore, for effective risk assessment and for mitigating illegal activities, KYC documents of every individual needs to be produced to the business management.
It is imperative that every individual furnish their KYC documents before opening an account or while investing in any business. This contributes to the process of monitoring their actions and also helps the organization in curbing the risk of frauds, adulterations and identity thefts.