KYC, also known as Know Your Customer, is an identification method used by most modern banks, credit unions, private lending companies, and other financial institutions for verifying clients and preventing various types of fraudulent behavior. For many companies and state institutions, it is important to perform background screening procedures of their clients before providing any services. It is also used in other fields, such as casino and gambling companies. However, this article will focus on the benefits to the financial industry.
It’s important to mention that the KYC process is not optional. In the USA, it is part of federal law, thus, financial institutions must follow it. It started as a part of the 1970 bank secrecy act, however, was strictly implemented after the September 11 attack under the ‘Patriot act’. The European Union (EU) has not left behind and issued a number of strict regulations, including The Fourth, Fifth & Sixth Anti-Money Laundering Directive (AMLD4, 5 & 6), The Payments Services Directive (PSD2), and more.
But what is the most effective customer identification procedure? What are the requirements for KYC? How can one test the product with real people and real personal documents? It’s time to dive deeper into the concept and clarify its importance for financial applications.
Let’s explore the benefits of using the KYC verification procedure from two sides – for the banks and for their clients. First, it protects customers from identity theft. Second, it effectively fights financial fraud and money laundering, as well as financing terrorism activity.
With an advanced KYC procedure, the clients of any financial institution can safely use their accounts with no risks of their money being stolen or blocked. KYC prevents the creation of fake accounts and eliminates the jeopardy of the wrong people getting access to the financial system.
As for the banks, using this program allows them to offer secure and higher-quality services. The reason is that the innovative KYC processes support financial institutions and government structures to effectively fight various types of fraud, terrorist financing, and other illegal operations performed by cybercriminals.
The number of financial-related institutions that use KYC continues to grow. Currently, it includes these types of institutions:
This approach is also used in thousands of finance tech applications, depending on the activities in which they engage.
Just like every digital product or process, it is crucial to test the solution before launching it in the real markets and with real documents. When it comes to testing services performed by financial institutions, the risk is much higher and it is necessary to use only real people with real devices and documents from the target market. These advanced checks should become an inevitable part of the testing process.
It is crucial to get KYC features tested by real people who actually live in the target market, use actual documents, and take selfie pictures of users (many services have such a requirement). However, most people who are part of the testers’ community have lots of safety concerns and are afraid of ID theft. As a result, it is incredibly difficult to find people who are willing to go through the KYC process for testing purposes.
What is more, crowd-testing also has a number of extra advantages:
KYC procedures are obligatory for all modern financial institutions and the bank sector. Failure to meet the requirement of using KYC might lead businesses to fines and penalties, as well as lower consumer trust. But how can ‘Know Your Customer’ procedures impact the entire banking world?
Crowdtesting allows checking all the features and functions of any digital product that uses know your customer programs. The biggest benefit of crowdtesting is the ability to get real users with real ID documents (all types, including social security cards, IDs, passports, driver’s licenses, etc.) to follow the KYC process and simulate real clients. Crowd Testing also allows identifying all the serious bugs and issues of your application by testing it by real users with real accounts and documents in many countries worldwide.
It is worth mentioning that the advanced check of KYC functionality is performed by professional Quality Assurance (QA) engineers. Consequently, they can easily detect various gaps and flows in the usability and performance of your digital product. Moreover, with crowdtesting, it is easy to test any financial app under stress to make sure it works perfectly in different conditions and environments.
Crowdtesting can complement the company’s in-house testing and provide detailed real-life results of how the digital product will perform in the real world. Currently, there are no alternatives to crowdtesting in the real-life testing niche. However, this solution remains flexible and affordable for a wide range of customers.
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