The jargon of the corporate world and the financial market covers a number of specific terms. One of the most recurrent has been the acronym of the KYC software, or Know Your Client. This is no coincidence, as it is one of the main strategies in any management focused on risk prevention and on improving results.
Especially after the launch of the PIX, in November 2020, companies have increasingly focused on improving their actions in the KYC area, adopting management software specialized in this segment.
After all, the new payment system quickly became the most popular among the public, and its implementation in transactions carried out within the scope of business required a series of care, in order to mitigate risks to financial operations and accounting.
In this article, we gather the main points on the subject, explaining in detail what this type of strategy is all about, its importance and how you can implement KYC software in your company. Let's go?
What, anyway, is a KYC?
The KYC concept consists of a set of rules whose purpose is to enable a given organization to know its customers in depth - especially in the sector financial.
KYC arises from the need to mitigate risks related to fraud, security, money laundering and illicit activities in general, unfortunately so common in the area. Therefore, it is an essential practice in the management routine of banks, fintechs, credit companies and other companies of this nature.
Generally speaking, KYC practices encompass actions that provide the company with a deep knowledge of the customer's profile.
Through the analysis of data referring to registrations, reputations and financial conditions, the company becomes able to carry out a continuous assessment of the convergence between the customer's profile and their financial routine - and, in this way, offer the most appropriate solutions to the needs of each one, with safety and transparency.
In practice, how important is KYC?
It is extremely necessary to bear in mind that each and every company, regardless of its doors or sector in which it operates, is subject to risks involving unlawful acts that jeopardize its financial security and accounting. Precisely for this reason, KYC has been increasingly adopted by all types of organizations, especially publicly traded ones.
Therefore, it is not difficult to understand why KYC strategies become so important to companies: firstly, by helping to guarantee the security and integrity of the business, allowing organizations to competently identify and verify the identity of its customers even before carrying out transactions or providing services – which guarantees a high strategic differential at all operational levels.
But, in addition, the use of KYC software is capable of centralizing data and providing a high level of automation and optimization for the company's financial management, significantly reducing the risks of fraud and money laundering, in full alignment with the applicable laws and regulations.
Last but not least, it cannot be overlooked that the operational solidity provided by strategically implemented KYC software is reflected in the relationship between the customer and the brand, providing the construction of a robust and lasting relationship, based on concepts transparency and mutual trust.
What are the objectives of a KYC software?
Once the points highlighted above are understood, we can easily conclude that the main objectives involved in the implementation of a KYC software occur in three spheres.
Financial security
First, this solution aims to ensure that an institution's financial processes operate safely, transparently and reliably.
To this end, this application features technological features that aim to automate and simplify the process of verifying and validating the identity of the company's customers, such as facial recognition, reading documents, among others. Thus, the company can carry out the verification quickly, accurately and securely.
Alignment with current legislation
Another fundamental objective of the KYC software is to promote the guarantee of compliance with applicable regulations and laws, in order to prevent the company from facing not only financial problems, but also legal complications.
Strengthening the customer experience
Ultimately, KYC software aims to improve the customer experience by reducing the time and effort required to carry out proper checks. Thus, the tool contributes to customer loyalty and retention and helps build good relations with the public and position the brand favorably in the market.
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How KYC works
An efficient KYC process starts at an internal level, even before establishing the relationship between the organization and its partners. Soon after this verification, it is time for potential customers to also be submitted to this process – a process that starts with onboarding, that is: in the initial stage of the final customer account opening process.
It is worth noting that, ideally, the account opening process is divided into three main stages that we present below.
Collection of information and identification documents
To ensure that the entire process takes place safely, it is essential to confirm that your client is, in fact, who he says he is – hence the importance of this first step.
This is the moment to carry out a detailed verification of the client's identity. Be sure to demand as many documents as you deem necessary, especially the CPF and some national identity document, such as RG or CNH.
Currently, the vast majority of banks carry out this process digitally: even institutions that do not operate exclusively in a virtual environment are already, for the most part, adapted to this trend.
In this sense, biometrics represents a powerful tool, as facial or fingerprint recognition are extremely efficient resources for authenticating the user's identity.
During this user identity verification process, your relevant demographic data is all collected automatically by the bank and stored in a CRM. In this way, the institution is able to carry out an optimized integration of its clients, favoring subsequent processes.
Risk analysis
In this second moment, it is vital to carry out a risk analysis of the client, in order to make sure of its reliability and protect itself from possible damage to the profitability and image of your company. Due diligence (CDD) strategies are good tools for this step, where understanding the customer's identity, location and business activities is essential.
Be sure to review valuable information such as the customer's location; their main occupations and sources of income; the types of transactions he usually performs; patterns of your financial activities; and payment methods. Indeed, this is the time to classify the customer according to their risk category.
Continuous monitoring
A good KYC policy understands that the success of the practice is linked to continuous monitoring of the evolution of the risks that each client may represent, and this is the key to the third step.
A good KYC software is capable of maintaining a steady pace in this monitoring, as any client can potentially migrate from risk category over time – after all, when we talk about finance, we are talking about a strong dynamic of situations, subject to all kinds of unfolding.
Remember that monitoring has the important function of supervising your customers' accounts and transactions, and that, for this process to take place properly, it is necessary that the risk profile is well outlined.
Be sure to consider the many factors that can influence the accuracy of your KYC practices, such as: spikes in activity; inclusion of persons on sanctions lists; periodic account reviews; and suspicious, unusual, or inconsistent activity as a whole.
How Truora Offers KYC Solution Through TruChecks
If you are looking for good KYC software for an automated, secure and transparent financial and accounting management process, ZapSign's recommendation goes to Truora's solution.
With TruChecks, it is possible to carry out an accurate online verification of the history of users, employees and suppliers in the most diverse spheres: criminal, penal, judicial, police, credit and international, among many others.
Truora TruChecks checks are done quickly and efficiently, and are carried out both at a personal, commercial or vehicle level, which makes it an essential tool for mitigating potential risks to your business, for safe decision-making and to establish strong trust in your brand.
Remembering that knowing your client well is an indispensable factor for the company to provide excellent service, free of errors that can have dire consequences for its results.
And, since we are talking about mistakes made by companies in customer service, how about checking out the special article we produced on the subject? Click here and happy reading!
