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Powered by Productfy: Build Trust and Keep out Bad Actors with KYC

Aaron Huang
Posted by Aaron Huang | Sep 21, 2021

Fintech is eating traditional banking and financial services, a trend that has only accelerated with COVID-19. With the increase in shop from home, digital delivery, and contactless payments, this all adds up to create a market that is forecast to exceed $10.5 trillion in transaction volume by 2025. 

Fintech is rich with potential. 

...And ripe for potential for problems that could delay or completely derail your idea. 

With the exception of healthcare, finance is one of the most tightly regulated industries in the world. Regulations can vary state by state, and failure to comply can leave your customers – and your company – at risk. That’s particularly true when it comes to the complexities surrounding KYC/KYB (Know Your Customer/Know Your Business.) You know the tech component well, but the “fin” part is a whole different ball game. And this truly is a case of what you don’t know could really hurt you.

Do it now, or pay more later.

The truth is, as soon as you launch your Fintech app, there will be a host of bad actors trying to hack into your system and probe for vulnerabilities. It’s not a question of if you’ll get hacked, it’s when. There’s a cybercrime hack attempt every 39 seconds. And your new app is fresh meat. A solid KYC/KYB process is a smart insurance policy. 

Know your KYCs.

KYC/KYB is the process of verifying the customer or business is really who they say they are. It’s up to you to ensure this hurdle is cleared, accurately and easily. Failure to adequately comply with regulations can lead to heavy federal penalties. Make your customers jump through too many authentication hoops, and they’ll leave for a more user-friendly provider. KYC/KYB isn’t just a good business practice, it’s the law. 

But it’s not as simple as just saying, “show me your ID.” Proof of authentication involves several steps - and all this authentication happens without ever actually seeing them in person. It’s all done digitally, mostly instantaneously, and involves an intricate back and forth dance between the user, your app, your program partner, and the bank. 

More than just a requirement.

You can look at KYC/KYB as “just something you have to do” – or you can see it as an opportunity to help your Fintech app succeed. If the process is frictionless to your user on one end, and backed by solid compliance on the other, then everybody wins. 

Users who find your onboarding procedure cumbersome will quickly opt out and not come back. You have one chance to make a good first impression, and this is it. The easier you make, the more customers you’ll get – and the more you’ll retain.

Speed to market matters.

Byzantine compliance rules and regulations can increase time to market, and with Fintech growing exponentially, time will literally cost you money. That’s why Productfy has chosen a different path – KYC/KYB is integrated into our platform, pre-approved by our bank partners and developed in strict adherence to compliance regulations.  

Many companies offer ‘real-time’ identity verification with algorithms. Some offer more manual processes in the back end, along with some automation. What most clients want is both speed to help with onboarding new customers and precision – no one wants to let a hacker through. 

How it works. 

Productfy’s solution is elegantly designed and well-documented, making it easy to integrate into your app.

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  1. Field capture - capture the relevant information for KYC. A vast majority of your users will get through this process with no hiccups. 
  2. KBA questionnaire - some of your users may be asked to answer questions to further verify their identity. This includes questions like former addresses and other information only your customer would know. 
  3. Document verification and liveness test. This last option is designed for the utmost security. If your use case requires this step, your customer will be required to upload the front/back of a driver’s license (the barcode on the back gets automatically scanned), a passport, or a green card coupled with a selfie on a desktop or mobile camera with AI-powered facial recognition algorithms. 

It’s not just the technology that’s important. 

Productfy offers KYC/KYB as a product or as a service, backed by an experienced BSA/ML team. It’s part of a complete BaaS and CaaS solution. (Banking as a Service/Compliance as a Service.) 

Productfy’s BSA/ML compliance team will run checks on potential false positives and negatives and act as the liaison between your application and the bank partner. Our solution is backed by compliance experts with decades of experience. If a customer doesn't pass the KYC/KYB process, it’s immediately routed to an expert with years of compliance experience for further vetting. 

This high level of security is important to stay in compliance with BSA (Bank Secrecy Act) and AML (Anti-Money Laundering) regulations. And having human expertise to back up the technology provides the assurance you need to deliver a reliable product.

But KYC/KYB is not enough.

KYC/KYB is just one component of a very important stack of features required to launch a financial product. It’s not sexy, but it’s the backbone your entire app will work on. As you begin to understand how interconnected and complex all of the behind the scenes aspects are, the value of BaaS and CaaS become clearer. Roll the product and the service together in order to seamlessly reduce friction for your customers. 

Spend the effort early in development to get it right or go back and fix it after the fact. If you’ve built a product that is at all useful, you’ll grow, and at some point you’ll hire a compliance officer and then they’ll point out everything you’re doing wrong (if you haven’t been hacked or shut down already.) And you’ll have to go back and fix it. At substantially more cost in time, money, and headaches.

For Fintechs eager to get to market, this is a game-changer. Productfy’s platform is thoroughly documented with a step-by-step guide on integration. It’s our mission to help Fintechs get to market faster with less friction.