Importance Of KYC verification For Digital Banks

Just imagine how worried customers are becoming with safely keeping their hard-earned money in banks!  This is where KYC verification steps in! 

What establishes identity as safe?

Verification of identities is an integral process in establishing the identities of customers, clients, or investors. A profile that has undergone confirmation checks and is deemed safe or low-risk is known as a verified identity. When opening an account or signing contracts with other parties, it is a necessary step. Even though the profile can be marked as “secure,” it’s still crucial to keep an eye on the users over time. The likelihood that a customer may switch from lawful to illegal behavior is one of the reasons businesses continue to monitor the activities of a client. Although some enhanced verification systems can be expensive investments, they are relatively cheap in comparison to billions of dollars lost in fines or penalties imposed by KYC/AML authorities. 

What is KYC verification?

It refers to the ‘Know Your Customer’ process. It is a series of steps that ensures the valid identification of customers during the onboarding process. This includes data validation against global or local databases, facial recognition, and other AML checks. 

CDD (KYC) In Banking 

One of the sectors that are most vulnerable to identity theft is banking. Customer due diligence is a crucial component of KYC onboarding in order to combat it. It aids banks in determining whether a client poses a threat to the company.

Nevertheless, not all requirements are universal because some may differ from nation to nation.

6 reasons online KYC verification is vital for banks

A financial institution may encounter substantial hazards, which is why digital KYC verification is necessary.

Threatening challenges include, among others:

Detecting Busting Sanctions

When someone is subject to a sanction from another bank but still manages to complete transactions by getting around the security system, this is known as sanctions busting.

Better Customer Experience 

Having a strong security system without any data breach cases creates a positive reputation for banks. Banking greatly relies on trust and building rapport. Therefore, online KYC verification is integral for a better customer experience. 

Restricts Money Laundering Attempts 

Money laundering is the process of hiding from banks or the law where the money comes from (usually from criminal activities like gambling or drug dealing) by presenting it as coming from a legitimate source on paper.

Boosts Account Openings 

With faster processing and authentication procedures, banks can experience a massive boost in the number of account openings. With the digitalization era, the attention span of consumers is only shortening. Therefore, slow methods aren’t working for any businesses. The faster you are in your services, the greater customer satisfaction. 

Prevent Identity Theft 

Cybercriminals steal data and other people’s identities, including social security numbers, in order to conduct financial transactions in the victim’s name on their own.

Blocking Terrorist Financing 

Terrorist financing is a serious criminal offence, it can lead to imprisonment and heavy penalties from the law. Therefore, it is essential for banks to keep a keen eye on any kind of suspicious activity. Lack of carefulness can contribute to the violence existing in the world through secret terrorist financing. 

How does KYC verification online work in Banks?

Online verification can range from live detection to video verification. The KYC verification online in the context of banking systems or Fintech companies can be divided into some simple steps.  In the context of digital KYC verification for banks, automated solutions can even extend to scanning and extracting relevant information from business cards, providing a seamless onboarding experience and reducing manual data entry errors.

  • Identity Proofing 
  • Validation Of Data 
  • Live Detection 
  • Video Verification
  • AML Screening 

Is automated KYC verification a replacement for manual verification?

The answer is YES! 

With the automation of services, companies are continuously inclining toward AI-powered tools. The reason for replacing it with manual verification can be categorized as many. Some of them are:

1- The automatic KYC verification is far more accurate as it removes any human error.

2- AI-powered tools can self-learn (machine learning) and update the methodologies according to drastic changes in technological development.

3- Hiring workers is far more expensive and time-consuming because it takes effort in finding a good employee who is dedicated to working.

4- Human beings can be swayed and bribed, and some employees can tamper with a business’s reputation by involving in corruption or taking money. For example, a money launderer can commit an amount of money to an employee if they open their accounts or conceal their money trail. 

5- Automatic software produces consistent outcomes while depending on a manual workforce can create inconsistency in outcomes over a long period of time.

6- Banks save time with efficient tech tools

So! The Pros of having automated KYC verification tools outweigh manual procedures massively.


KYC verification has become necessary for banks, especially digital banks to combat the rising threats from cybercriminals and identity thieves. By verifying the identities of customers, businesses can mitigate the risk of fraud and money laundering, and comply with regulatory requirements.Overall, KYC verification plays a critical role in maintaining the integrity of financial systems and preventing criminal activity, while also preserving the rights of individuals.

Similar Articles



Please enter your comment!
Please enter your name here

Most Popular