There’s a new buzzword in business today – it’s actually a three-letter acronym that refers to a way to track customer identities. It’s called “know your customer” or KYC, and it’s something that a lot of business folks are trying to learn about, for some pretty important reasons.
Businesses of all kinds are embracing this principle of identity verification process. Whether it’s a cryptocurrency exchange or a factoring company, or a company that deals in Internet of Things (IoT) services, many executives are looking at KYC as an important part of compliance and something that can enhance their daily operations. They’re looking at how to integrate KYC capably, in order to compete and to demonstrate an ability to keep pace with best practices in their fields.
What Is KYC?
“Know your customer” is essentially the principle of collecting vital customer information to understand who is using a company’s products and services. That may mean knowing their names or having financial info hashed in a database. It might mean knowing social security numbers as unique identifiers to ensure that duplicate names don’t cause issues. KYC (Know Your Customer) compliance is an important part of doing business. To get the benefits out of it, you need to implement KYC services provided by Acuitytec.com in your business to maintain the safest environment possible.
KYC mostly developed in the cryptocurrency world, at least at first, where the decentralized nature of coins and tokens means there is not an inherent tracking of customer identities. That in turn paved the way for concerns about fraud and money laundering, and KYC was born. In fact, in this industry, KYC is often talked about in relation to AML, for example, where companies may need a good set of KYC/AML rules and compliance standards.
In fact, in crypto, not having these standards can get leaders in hot water. In some ways, scare stories abound on the Internet about exchange operators and others trying to skirt KYC rules, either for operational efficiency or just because they don’t feel like complying.
In other industries, KYC might be much more implemented on a volunteer basis in general. But it’s still a vital part of business, for the reasons that we outlined above.
In terms of best practices, KYC is generally seen as a benefit. That’s notwithstanding cybersecurity concerns, which we’ll get to later.
So how do you work this into the operations of a factoring company or any other firm?
Starting from the premise that KYC is about knowing your customer, you collect information in several key ways. The hardware setup can be on-premises or in the cloud, for example.
You might have a standalone software suite that is responsible for collecting and tracking customer identifiers including names, Social Security numbers, account numbers, and more.
On the other hand, you might have these identifications built into a greater architecture that also plays other roles like customer relationship management or more general business insight analysis.
Either way, your KYC operations are going to be vital if you need to provide data to any regulator or other third-party group.
But they can also yield good information for business intelligence, too.
That’s vital if you happen to be a business leader who views data as the most valuable asset that a business has. You might want to do certain KYC operations even if you don’t need to do them for compliance, including:
- Putting identifiers into CRM
- Putting identifiers in a spreadsheet
- Having sales staff collect information
- Having customers identify themselves through web forms
Any of those can be effective ways of using KYC technology to your advantage.
KYC in Cybersecurity
If you’re going to utilize KYC tools, though, you’re going to need good cybersecurity to keep that sensitive information safe.
You’ll typically have data centers and a core network that needs to be protected and shielded from hackers and black hat actors.
One way to do that is to secure cybersecurity beyond the perimeter, as mentioned in excellent guidance like the NIST cybersecurity framework.
Another principle here is to anticipate threat incidents and practice good threat detection, closing loopholes, fixing vulnerabilities and evaluating network traffic.
Cloud native systems can help. So can extensive firewall features and other tools that will lock out unauthorized users.
Enhancing KYC in Business
As mentioned, KYC has at least two major uses – first, complying with customer identification requirements, and second, having good point-of-sale information fed back into the business model.
With that in mind, enhancing your KYC is also going to help.
Companies might want to house some of this information in CRM systems.
They might want to take a look at their total ERP planning and give it a complete overhaul based on KYC requirements or considerations.