Fintech and the finance industry are one of the fastest-growing industries around the world. Technology advancements have created a digital landscape for money transfer and transactions, increasing the demand for fintech.
While the need for online transactions and digitalized currency has increased, the market has also seen a significant rise in digital fraud and online money extortion.
The finance industry is facing issues that didn’t exist a few decades ago. However, one of the integral parts of the payment industry is also evolving with time, helping to reduce the risks of online fraud.
KYC (Know Your Customer) is a crucial aspect for any fintech, transaction platforms, banks, insurance companies, lenders, and other financial organizations.
Earlier, KYC was used to determine the reliability and authenticity of customers’ personal information and claims through manual inspection and document verification.
With time, the KYC platform has evolved and extended to cater to several types of online and offline verification.
Now, Fintech and payment industries can verify age, location, government documents, social media profiles, online activities, and overall description of users, even in online mode.
KYC is done by the third-party providers, which are contacted by companies to provide them with software and manual assistance.
KYC providers help Fintech and other payment industries to verify their customers and also share a risk score for every individual. This data helps companies in deciding if they want to lend money or provide their services to a particular customer.
Can Fintech and the Payment Industry Survive without KYC Providers?
Well, they may survive, but they will not get ahead in the long run. KYC services not only prevent businesses from identity theft or fraud but also help them in creating a legitimate customer base that contributes to the company’s growth.
Many Fintech startups and money-lending companies use a “No-KYC” approach to attract a large number of customers, even for small amounts.
These companies avoid KYC to create a large customer base in a short period of time, which often leads to financial loss for both the business and customers.
Their users mostly include individuals with high-risk scores, low credit scores, temporary sources of income, and black money.
These are blacklisted users who won’t get money from regulation-compliant firms, so they apply for loans and cards at high interest rates with basic personal information that also turns out to be fabricated mostly.
Companies don’t have any verified data about customers, making money and penalty regulations difficult for them.
Similarly, when such fintech startups or company goes bankrupt, they don’t have a proper database of their users and customers end up losing their money and savings.
According to The Independent report, in 2024, Synapse filed for bankruptcy, leaving 100,000 users cut off from their funds as there were no proper records and systems to verify the amount and customers.
While some companies may function without KYC, it leads to financial harm for both parties in the long run. KYC service is a pillar that supports the growth of the finance industry as well as customers, contributing to the overall global growth of the Fintech and payment industry.
What is a KYC Provider?
KYC providers are generally an organization that provides services to verify the legitimacy and identity of customers. KYC solutions are necessary to avoid the risk of fraud and identity theft.
Know Your Customer services not only help in mitigating frauds but it also allows Fintech to determine the financial capability of an individual.
For instance, if any individual wants to borrow $500,000 thousand from banks. KYC service providers will perform background verification and create a report on the basis of their financial income and expenditure.
This report will help companies to determine if they can offer a loan of $500,000 to an individual or if he can avail himself of a lower amount.
KYC companies are back bone of financial organizations, helping them in building a trustworthy and profitable customer base.
How the KYC Industry Works?
The KYC industry has a vast range and includes a number of services and products. Top KYC companies like IDMERIT provide SaaS to other businesses to verify the identity of their customers.
IDMERIT services include KYC, KYB (Know Your Business), age verification, document verification, customer onboarding, and other verification-related options.
IDMERIT provides KYC services to the Fintech and payment industry to regulate the customer onboarding and mitigate fraud risks.
KYC providers verify customers’ government documents, address, bills, financial activities, turnover, and transactions. Verification is done through several methods, like video-calls in which location, facial recognition, and government IDs are verified.
The second method includes stored data verification, in which all the copies of customers’ documents are verified and cross-checked with the original database.
In addition to the Fintech and payment industries, adult entertainment, alcohol retailers, age-restricted sites, and other businesses also use identity verification services to comply with government regulations.
