Honey Badger

KYC (Know Your Customer)

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What is KYC?

Know Your Customer (KYC) is a critical process used predominantly in the banking and financial sector to verify the identity of customers. This procedure involves assessing the risks associated with a business relationship, crucial for preventing illegal activities such as identity theft, financial fraud, money laundering, and terrorist financing.

Purpose and Users of KYC

The main goal of KYC is to ensure legal compliance, manage risks, and prevent financial crimes. It’s not just limited to banks and financial institutions; insurance companies, investment firms, real estate businesses, and fintech companies, particularly those dealing with digital payments and cryptocurrencies, also implement KYC practices.

How KYC Works

KYC involves the collection and verification of customer information, including:

  1. Identity Verification: Verifying the customer’s name, date of birth, and address through official documents like passports, driver’s licenses, or utility bills.
  2. Due Diligence: Conducting background checks to assess the customer’s risk, including checking against watchlists and sanction lists.
  3. Ongoing Monitoring: Regularly updating customer information and monitoring transactions for suspicious activities.

Types of KYC

KYC can be divided mainly into traditional and electronic KYC (e-KYC). Traditional KYC involves in-person verification and manual checks, whereas e-KYC leverages digital methods and biometric technologies for efficiency and speed.

KYC in Fraud Detection

Implementing KYC is pivotal in fraud detection and prevention. By verifying identities, tracking financial transactions, and enhancing the security of these transactions, KYC plays a vital role in reducing unauthorized or illegal financial activities.

The Challenge of Friction in KYC

While KYC is essential, it can create friction in customer experience, leading to challenges like:

  • Longer Onboarding Times: Extensive checks can delay account opening or service access.
  • Invasive Processes: Customers may be uncomfortable sharing personal information.
  • Technical Challenges: Difficulties with online verification methods or document submissions.
  • Customer Dropouts: Frustration with the process can lead customers to abandon the service.

Light vs Heavy KYC

The concept of ‘light’ and ‘heavy’ KYC addresses this friction. Light KYC involves basic identity checks and is usually the first step, ideal for low-risk services or as a way to quickly eliminate bad actors before proceeding to more detailed KYC checks. It is quicker and less intrusive. On the other hand, heavy KYC is more comprehensive and includes in-depth background checks, typically reserved for high-value transactions or services with higher risk profiles.

Tailoring KYC to Individual Needs

Recognizing that KYC isn’t a one-size-fits-all solution is key. A tiered approach is often more effective, starting with light KYC for most customers and escalating to heavier checks for high-risk scenarios or when suspicious activities are detected. This approach helps in balancing the need for security and legal compliance with maintaining a positive customer experience.

KYC remains an indispensable tool in the financial and business world, striking a balance between security, legal compliance, and customer experience. By understanding and appropriately applying light and heavy KYC measures, organizations can both safeguard against fraud and cater to the varying needs and risk profiles of their customers.

How can Honey Badger help?

Honey Badger is a leading provider of light KYC checks that can happen instantly and without any customer friction. For example, personal information can be verified against the data held on file my mobile network operators. This provides a lost cost way of ensuring the customer information matches a trusted and verified third-party data source. To find out more visit Honey Badger’s Risk Insights page.

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Account Servicing

Stop fraud and improve customer experience during account servicing by eliminating SMS One Time Passwords (OTP). Instead, leverage phone based SIM authentication which involves comparing data generated by the Mobile Network Operator (MNO) with mobile device session data. This provides a foolproof way of proving that an individual is in possession of their two-factor device.

Benefits

This new approach to authentication isn’t susceptible to SIM swap attacks and doesn’t require the user to enter a password. Ultimately, account takeover attacks are blocked, while customer experience is improved and the time taken to service a request us reduced.

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Contact Data Cleaning

Contact Data Cleansing verifies that the contact and personal information you hold isn’t out of date or inaccurate. Data is compared against the information held on file by Mobile Network Operators (MNOs). Whether processing a single record or sanitising thousands of records in batch, you’ll quickly identify bad data.

Benefits

The case for maintaining up-to-date records goes way beyond good practice for compliance and regulatory reasons. It’s critical to ensuring customers are contactable. Furthermore, it reduces security threats by ensuring communications aren’t sent to the incorrect individuals.

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SIM Swap Detection

SIM Swap Detection is a critical step in stopping account takeover. Why? Because account takeover attacks commonly exploit the ease of which a phone number can be stolen by simply assigning it to a new SIM. This allows bad actors to intercept communications, such as SMS one-time-passwords (OTP), which are used by 93% of enterprises worldwide to verify customers.

Benefits

SIM Swap Detection instantly and silently checks the history of a SIM card to see when it was last swapped. Recent swaps indicate high risk of fraud, allowing you to take appropriate action, such as failing verification or requesting additional security procedures are followed.

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Social Trace

Social Trace significantly reduces the risk of losing contact with your customers by diversifying communication channels. Simply drop the Social Trace widget into your onboarding workflow and allow customers to connect one or more social channels with just a click.

Benefits

Lenders who capture social channels are significantly less likely to lose contact with their customers. Why? Because different demographics prefer to engage over different channels. This is particularly important when it comes to collections. Initiating contact over different channels increases your chances of getting a response, which in turn increases the likelihood of resolving late or non payment. 

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Mobile Fraud Check

Mobile Fraud Check allow you detect fraud indicators using data provided by Mobile Network Operators (MNOs). Key checks include device overseas, call forwarding, SIM swap, a high risk number database lookup and much more.

Furthermore, Mobile Fraud KYC allows you to verify a person’s firstname, lastname, date of birth and postcode against the data held on file by MNOs. Since MNOs conduct their own KYC checks on new customers, it gives you the ability to match personal information you collect against a trusted and verified source.

Benefits

Mobile Fraud Checks happen instantly and with zero customer friction. The data held by MNOs is often more recent and reliable than other data sources and a level of granularity is provided,  allowing you to see how many and which KYC fields matched.

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Mobile Data for Credit Risk

Mobile Data for Credit Risk delivers the data required to predict credit risk based on a persons mobile phone information. Key data attributes include the network provider, line type, and KYC match information. Working in partnership with lenders we’ve been able to clearly identify correlations between this data and the likelihood of a loan going into arrears.

Benefits

Open Banking Vs Mobile Data. Which is the most effective in predicting bad borrowers? A recent project with a UK lender compared a risk model built with Open Banking against a model built with Honey Badger’s Mobile Data. The results showed that both models outputted almost identical risk scores. The difference? Mobile Data could be deployed immediately with no customer friction required to calculate a risk score.

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Geo Authentication

Geo Authentication™ provides frictionless identity verification that reduces abandonment rates. Users simply select images that they recognise from nearby to their address. In built anti-fraud controls ensure that valid users can complete the challenge whilst bad actors are blocked.

Benefits

Leading lenders such as Amplifi Capital use Geo Authentication during applications as an alternative to more intrusive identity verification checks, such as document uploads, that cause high friction and lead to increased dropouts. Completion rates with Geo Authentication are 28% higher and have subsequently helped drive an increase in revenue for the business.

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 LENDERS   ONBOARDING   ACCOUNT RECOVERY 

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