Three types of KYC verification for a modern bank

With more and more of our transactions now taking place online, the issues of cybercrime and identity theft prevention have become increasingly hot potatoes in financial circles. New legislation – at both the national and international level – has raised the bar for banking institutions, meaning they must place more of an emphasis on Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols than ever before.

Of course, this involves something of a balancing act between legal compliance and user experience (UX), since consumers want all the advantages of a robust security system with none of the inconvenience of endless identity checks. How, then, can banks handle proof of identity for financial services without overly taxing their clientele? Here are three of the most effective KYC verification techniques for a bank in the 21^st century.

Agent-based verification

The most traditional and most prevalent method of KYC verification is via the use of a banking agent, who speaks with the applicant, views their identification documents and ascertains that they are who they say they are. For decades, this has been handled in person, with an applicant asked to visit their local branch at a time of their choosing to complete the process.

However, advances in modern technology – alongside a gradual shift towards digital banking – have seen agent-based verification take place remotely on an increasingly frequent basis. Instead of visiting a branch, an applicant can simply arrange a time and date to conduct a video call with the agent, who will then carry out all the normal protocols remotely. This saves both time and effort for the customer and enhances their UX.

Bank account verification

Another method of KYC verification that is becoming more commonplace is by leveraging the data contained within an existing bank account. If an applicant already owns an account or has purchased a product from one supplier, for example, and wishes to do so again with another one, open banking technology can allow the former institution to share the data with the latter.

All that’s required on behalf of the customer in this scenario is the provision of appropriate ID and the completion of a micro-transfer of funds from one account to the other to guarantee their details. Once that has been approved, it falls to the customer to confirm all the data is correct and voila, the KYC verification is complete.

AI-driven verification

Although not as widely practiced as the other two avenues of KYC verification, AI-driven techniques are extremely promising for the future of the sector. This method combines the use of a variety of technological tools such as biometric readings, data science and near-field communications (NFC).

This has the potential to be the most accurate and most efficient method of KYC verification in the future. That’s because the process can be completed almost instantaneously and with minimum disruption for the customer, as well as adapting to a growing number of data points. For banks that are already set up to embrace the digital revolution, AI-driven verification is the solution of tomorrow, today.

Although adhering to KYC and AML legislation might seem like a baffling ordeal, these three techniques of identity verification can ensure that all financial institutions provide the perfect compromise between convenience and compliance.