Zurich, 21 April 2022 – Although the customer is king, anyone wishing to do business with these often demanding and occasionally temperamental monarchs must first ensure they are not dealing with imposters. This delicate negotiation between online service providers and their customers is performed using the “know-your-customer” principle (KYC).
Originating in the financial sector, KYC was originally developed to prevent fraudulent practices such as money laundering and to enforce sanctions against individuals and organisations – so as combat terrorism for example. These days, the principle is no longer restricted to banks and financial service providers but is used whenever companies are required to investigate prospective customers or business partners for compliance reasons.
It’s also applied in everyday scenarios; like if identity proofing is required in order to unlock a prepaid SIM card. For many years, this was very time-consuming and costly in terms of human resources. Customers had to go to a physical post office branch to have their identification documents inspected. Yet the Video Ident method used to compare the person and document by video chat also comes with drawbacks: The call centres required for this purpose are costly to maintain and the service availability is limited by the working hours of the staff.
In the meantime, technology has evolved and identity proofing based on the KYC principle can now be performed entirely in the digital domain: Biometric processes make it possible to compare a photo ID with live images captured by a webcam or smartphone camera automatically. What’s more, other types of documents that may be required can also be scanned using image recognition and checked for plausibility. The specific documents required will vary from sector to sector, although financial service providers and banks are generally subject to the strictest regulations. The most common method involves querying and verifying a combination of different identity features.
- During this document check, the person’s identity document is inspected for signs of forgery or other problems.
- Facial or liveness checks ensure that the camera lens is capturing a genuine three-dimensional face rather than a video or a photo. A comparison of the customer’s biometric features and photo ID ensures that both match.
- An address check requires the prospective customers to furnish a proof of address or POA. Examples of this type of document include a current electricity or gas bill. The address on the ID card is then compared with the POA document.
The limitations of KYC: the special case of B2B
All of these proofing methods can be completed within a few minutes thanks to automated verification processes. But be careful: Although the KYC process can be implemented swiftly for relationships between customers and companies, the situation in the business-to-business sphere is more complex. Companies wishing to open a business account need to factor in longer waiting times. To meet all compliance rules, they have to provide detailed information – typically concerning their legal structure, industry, number of employees, details of their ownership relations and company structure. Since it hasn’t yet been possible to fully automate these checks, there’s considerably scope for improvement in the years ahead when it comes to digitalisation of KYC in the B2B sector.
Nevis develops security solutions for the digital world of tomorrow. Its portfolio encompasses passwordless logins, which are intuitive to use and offer optimal protection for user data. Nevis is the market leader for Identity and Access Management in Switzerland and secures over 80 percent of all online banking transactions. Public authorities, leading service providers, and industrial enterprises worldwide rely on Nevis solutions. The authentication specialist has locations in Switzerland, Germany, and Hungary.
LEWIS Communications GmbH
Ingo Geisler, email@example.com