Ultimate guide to streamline client onboarding with a comprehensive KYC checklist

1. Why client onboarding is crucial and what is the role of KYC?

Customer onboarding is critical to creating great customer experiences. It’s about showing customers how to get the most out of your products and services, and if it is poorly handled can leave a negative impression. Research shows that acquiring a new customer is anywhere between five and 25 times more expensive than retaining an existing one, which is why user onboarding should be a priority for any business. 

Properly managed, customer onboarding will result in happy customers. Beyond that, there are other benefits to getting the onboarding process right. Happy customers are much more likely to become repeat buyers who come back to you repeatedly for the same experience. In addition, satisfied customers are more likely to tell their friends about your service – what is commonly termed word-of-mouth marketing. Consumers are also more likely to pay a premium for a service if they perceive the onboarding process to be smooth and efficient. The requirement to discover the beneficial ownership of business customers, partners, suppliers and other business relationships is growing. 

Evidence appears to back up these findings. Customers who have a positive impression of the onboarding process have much less drop-off after 21 days of being a customer compared to those who have a negative experience. In terms of revenue generation, companies that put more effort into their user onboarding were able to increase their prices by 10 percent. 

However, the customer onboarding process can expose companies to financial service risks. Many businesses are required by law to prevent financial crimes such as money laundering and tax evasion. Failure to comply can result in significant financial penalties, and, in the worst case, loss of license. So, companies are also obliged to use the user onboarding process as a means of verifying the identity of individuals and establishing their identities. 

To tackle this challenge, businesses usually follow the Know Your Customer (KYC) onboarding process. This involves establishing a customer identification program (CIP).  Although the process varies geographically, this is a 4 step workflow that involves verification processes for collecting the full name, date of birth, and address of the person. Once a company has this information, they must verify that the person providing the information is the person the information belongs to. To do this, the individual will often be asked to provide a government-issued ID and a selfie. 

Establishing the correct KYC onboarding processes is a vital part of ensuring that your business meets its regulatory requirements. However, if your KYC verification processes are too burdensome or inefficient, you’ll find that your conversion rates drop sharply. For this reason, you should consider how your KYC onboarding process can be streamlined and automated, without sacrificing anything that is a regulatory requirement.

2. What role do the key components of a KYC checklist play in enhancing user trust during onboarding?

Customers want a frictionless onboarding experience – more than three out of five users (63%) consider the process when deciding whether to purchase a service or a product. When it comes to completing the KYC process, consumers want to know that it will be quick and effective and that their data will be protected. 

To maintain user trust throughout the process, companies need to bear in mind these factors:

Verification Accuracy

An important step in the KYC process is identity verification. To prove a person is who they claim to be, they will be asked to provide proof of identity and address. Companies can expedite the process and onboard customers within a day or even hours by using an automated solution. When it comes to this step, time is of the essence – customers will give up and go elsewhere if they must go through a long and convoluted verification process.

Transparency

It is also vital that the KYC process is transparent. Let’s take the insurance industry as an example. Potential policyholders must be thoroughly screened before a policy is issued. Their identity should be established, and their risk level assessed to prevent fraudulent activities. But for the customer to have trust in the process, it must be fully transparent – they need to understand what the insurer’s requirements are and why they are being asked to share personal information.

Data Security

KYC involves the sharing of highly personal data. All this collected data – whether it involves documentation or biometric authentication information must be protected. To maintain user trust, companies should ensure that they are compliant with the General Data Protection Regulation (GDPR) and make the customer aware of this fact. The regulation obliges companies to protect the personal data that they handle and the privacy of their customers.

Efficiency

Lengthy KYC processes can frustrate customers and result in increased abandonment rates, especially in industries where fast onboarding is essential. That’s why many organizations are now moving away from manual KYC processes. Manual processing tends to be time-consuming and labor-intensive. It is easy for errors to creep into the process, which can substantially lengthen it. KYC automation, on the other hand, can have a positive impact on the customer. Automating KYC processes can significantly reduce the time to verify customer identity and assess risk. This can result in faster onboarding, improved customer satisfaction, and increased customer loyalty and retention. 

3. How do businesses ensure the effectiveness of user identity verification by focusing on the key components of a KYC checklist?

Fraud is a growing problem for businesses and consumers. According to the Federal Trade Commission in the US, consumer losses related to fraud increased by 70% in 2021 to more than $5.8 billion. Increasingly, fraudsters are stealing peoples’ identities and using them for criminal purposes, a process known as identity theft. One way in which organizations can prevent this practice is through identity verification. But for identity verification to be effective, it must be incorporated into a KYC process and handled in a particular way. So, let us look at the different components of a KYC checklist and how they inform user identity verification.

Document Verification

Identity verification involves the submission of KYC documents such as passports and driving licenses. Document verification involves checking the originality of submitted documents. Often this process involves checking document fonts, watermarks, holograms, and other security features. To save time and effort, this process is often done through automation.

Data Validation

Accurate identity verification is dependent upon the data that customers provide. That’s when data validation comes into play. Within a KYC context, data validation is the process of verifying the identity and validating data customer data before it is used. It may be tempting to skip the validation process, but it is a vital step in ensuring that accurate results are generated by identity verification.

Identity Authentication

Establishing a person’s identity can be difficult, particularly online. Identity verification helps to ensure that somebody who claims to be someone is that person. Authentication is often carried out using items that a person already has. It might involve tokens, ID badges, or key cards. Alternatively, authentication may be based on what someone is – which is why biometric information and documents are often a cornerstone of identity authentication. Whatever method is employed, authentication is a vital step in proving that a person should have certain rights and privileges – for example, having the opportunity to open a bank account. 

Risk Assessment

The purpose of risk assessment is to identify and evaluate potential risks that might arise from providing services to a particular customer. Some prospects then get inducted into another stage, which involves enhanced due diligence (EDD). EDD is intended to mitigate the risk associated with high-risk customers and involves a more detailed analysis of a customer’s risk profile.

Ongoing Monitoring

Once a customer has been onboarded, there is an extra stage to the KYC process. Ongoing monitoring allows banks to identify any unusual patterns or changes in customer behavior that might indicate high-risk transactions. Sometimes organizations are also mandated to carry out an additional stage – reporting suspicious activity. Any activity that appears odd or out of the ordinary must be reported immediately to the relevant authorities.

4. What benefits does effective user onboarding bring to businesses in terms of compliance and KYC practices?

KYC practices play an important role in combating financial crimes like money laundering. In fact, if a business fails to carry out KYC onboarding properly and does not meet its anti-money laundering (AML) responsibilities it can suffer huge fines and significant reputational damage. KYC compliance, on the other hand, can play an important role in fighting fraud, money laundering, and tax evasion.

 5. What impact does efficient onboarding combined with KYC have on fraud prevention and risk management?

Verifying customers’ identities through KYC onboarding can prevent fraudsters from entering your systems in the first place. If ID verification is carried out properly, it should identify out-of-date, inaccurate, or mismatched information. Efficient onboarding can also play an important role in risk management – every business must protect its reputation at all costs, and KYC plays an important role in this respect. 

6. How can Veriff's KYC tools enhance the efficiency and accuracy of the onboarding process?

Veriff has several KYC tools that can enhance the accuracy and efficiency of the customer onboarding process. 

Our powerful identity verification solution is proven to deliver speed, convenience, and low friction to users. Combining AI-powered automation with reinforced learning from human feedback, our solution supports more than 11,300 document specimens from more than 230 countries and territories. See the worldwide map here!

One aspect of the KYC onboarding process that can’t be sidestepped is Proof of Address (POA). Our POA system helps you stay compliant whilst getting a comprehensive view of a user’s identity. Users can easily capture an image or upload a copy of a POA document. The document type and issue date are then checked to ensure they are suitable and valid. Providing the document passes this test, the user can then be onboarded successfully. 

Our Age Verification solution completes our list of KYC products. Supporting 11,300 identity documents across 230 countries, it enables you to seamlessly confirm whether users are above a predefined minimum age threshold.

 FAQs

1. What is the difference between KYC and client onboarding?

Client onboarding is the process of welcoming new customers into your business, while KYC (Know Your Customer) is a process of identifying and verifying individuals. It is important to note that not all customer onboarding involves KYC.

2.  What is client onboarding in KYC?

Client onboarding in KYC is a set of processes business must conduct before taking on a customer. The procedures involve verifying a person’s identity by collecting information associated with their name, date of birth, and address.