The Small Business Challenge of KYC Compliance
The requirement to Know Your Customer (also known as KYC) is well-established in the financial services world. It’s a costly process to maintain compliance with KYC, even for the world’s largest corporations. For small businesses, the challenge of KYC is even more daunting. Yet all is not lost: there are some simple and secure ways for small businesses to comply with KYC mandates – without breaking the bank.
The challenge of KYC
There are approximately 29 million small businesses in the U.S., representing more than 99 percent of all businesses and nearly half of private-sector employment. Thus, what affects small businesses affects a significant portion of the U.S. economy.
The challenge of KYC certainly has an impact on small businesses. According to Bain & Co., most major banks spend 15 to 20 percent of their budget on compliance and governance. Major banks may have the budget to cover these costs easily, but smaller businesses have less revenue and fewer staff resources. When resources are tight, it becomes crucial for small businesses to meet KYC compliance through cost-effective methods.
However, not all methods of verifying identity are created equal, so simply going with the cheapest option is risky. Many traditional verification methods rely on static data sources that can quickly become outdated. For instance, although an individual’s credit report or driver’s license may list an address on record, they could have moved within the last 2 years without updating either record.
The technology that can help
Fortunately, there are ways to overcome the challenge of KYC that small businesses can harness as easily as the big banks. Many of the costs associated with identity verification are labor costs: hiring new staff or using up staff time on manual review of documents. Mitek found that automating KYC can reduce the cost of compliance by up to 70 percent.
Automation provides the additional benefit of ensuring that the data sources used for verification will be up-to-date. Small businesses can use technology partners to gain digital access to customers’ bank statements, utility bills, and more. Through digital channels, businesses can rest assured knowing that the documents they view are verified from a regulated source and recent.
The challenge of KYC is no small hurdle to overcome. Businesses don’t need to take on this challenge alone: leveraging technology partners enables them to quickly and confidently verify the identity of their customers, so they can focus on business priorities and growth. In a new decade, the time is ripe to take advantage of new technology, and small businesses shouldn’t be left behind.
Interested in learning more about how to navigate identity verification in an increasingly digital world? Check out our eBook.
You might also be interested in:
- Automating the Regtech Workflow
- Friction is the Future: High Risk, High Security ID Verification
- Risky Business, Pt. II: Intelligent Automation for ID Verification
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About Honor Donnie
Honor Donnie is a Marketing Coordinator at Urjanet, with a passion for content creation. When she’s not at Urjanet, she can be found reading, cooking, and listening to great music.