Reduce Risk And Accelerate Approvals With Know Your Customer (KYC) 

February 15, 2022

In the world of finance, knowing your customers means more than figuring out what brands they prefer, or how often they shop online. Most commonly known by the acronym, Know Your Customer (KYC) is a vital part of the payments process. It reduces the risk of fraud, ensures compliance with regulations and industry best practices, and ultimately provides a better, more secure, experience for both merchants and customers.

What is KYC?

Gone are the days when business was done with a firm handshake and a promise. Just as you wouldn’t hand over cash to a stranger on the street, payment facilitators need to know what risks they may incur by doing business with sub merchants, and if there are any skeletons lurking in a client’s compliance closet.

Enter KYC. Also referred to as Know Your Customer, KYC falls under the umbrella of Anti Money Laundering (AML) procedures followed by financial institutions to protect themselves from prohibited merchant types and fraud. KYC and AML are risk avoidance techniques which are both dedicated to identifying and verifying clients to prevent money laundering. KYC solutions primarily involve corporate identity verification, business classification, product/service review, negative news and sanctions list screening, and in many cases also involve a dive into a customer’s financials.

The definition and meaning of KYC varies from jurisdiction to jurisdiction, but in the US it’s largely governed by Treasury Department, banks and their regulators, and the payment card brands which established minimum KYC and Customer Due Diligence (CDD) requirements.

Now payment facilitators are tasked with implementing their own KYC and CDD protocols when it comes to onboarding new merchants – putting pressure on underwriters to play detective.

Why improving your KYC leads to smoother onboarding and enhanced fraud detection

In the internet age, all it takes to build a false identity and a passable credit history is a wifi connection and a lack of scruples. Fraudsters are inventive and as technology becomes more sophisticated so do their tactics. Financial misconduct comes in many forms, and is increasingly difficult to detect without high-level KYC practices and tools. Add in the disruptive influence of the pandemic – driving more business online and renewing interest in cashless solutions – and you have a perfect storm of perfect risk.

All of which has naturally made Payment Facilitators (PayFacs) nervous. At this point in time, KYC isn’t just a regulatory requirement, it’s a necessary component of a proper risk management solution.

Aside from the obvious perk of not inadvertently becoming a money laundering front, PayFacs have plenty of reasons to step up their KYC verification protocols. Improving this key part of the merchant onboarding process can enhance business across the board with better approval times, faster processing, and refined risk management.

Speedy approvals with KYC

Posterboy of the $100 dollar bill, Benjamin Franklin, coined the phrase, ‘time is money’. While it’s safe to assume he wasn’t thinking about online vendors, it’s just as accurate today as it was when he wrote it. For merchants, every minute spent hanging around for approval is a minute of lost revenue. And if you can’t provide a fast and frictionless service, your merchant is going to shop around for a PayFac who can.

Automated merchant onboarding and underwriting can give you that competitive edge so you never lose another client to drawn-out due diligence. Integrated into Agreement Express’ Merchant ScanXpress platform, KYC SiteScan quickly and efficiently automates most of the required merchant KYC tasks including a crawl through the merchant’s site for risk, corporate validation from secretaries of state, social media reviews and ratings, consumer complaints, governmental actions, negative news, watch list screening, business classification detection and legal and regulatory compliance for approval in a matter of minutes.

It’s as simple as saying “fetch” and getting KYC SiteScan to collect the goods for you, instead of having a human manually collect all this data.

KYC as part of your risk management strategy

Risk may be a part of life, but it shouldn’t be part of the way you do business. KYC automates necessary validation processes and reduces risk even further, not to mention lifting some of the burden from underwriters so they can make key efficiency gains.

Our risk scorecard tool, Merchant ScanXpress, gives underwriters the ability to create different scorecards for different merchants, customizable with over 127 risk criteria so it can be tweaked to fit the specifications of each individual merchant.

A small online custom jewelry maker has little in common with a huge grocery franchise, so why treat them the same? PayFacs cater to a wide range of businesses, all with varying degrees of risk. Having the flexibility to tailor your KYC for each doesn’t just strengthen your risk reduction, it also speeds up the entire approval process as the system can quickly hone in on the relevant data and discard the rest.

That’s where KYC SiteScan also comes in – the report and data gleaned from its review of the merchant is fed through to auto-decisioning software which assesses the analytics and can then red flag the application for review, deny it, or grant approval within minutes.

This gives your underwriters some breathing room, sifting out the straightforward approvals to leave only those problematic applications that need a closer look. Merchant ScanXpress has helped payment processors funnel over 60% of applications to auto-decisioning, so underwriting teams can declutter their workflow.

Faster payment processing with Agreement Express

Humans are impatient by nature (just ask anyone standing in line at the bank). We hate to wait and the internet has only made us worse – promising instant purchases on anything, day or night. Merchants detest delays, because their customers detest delays. If you’re not providing seamless and speedy service, you’re making it easy for merchants to lose whatever patience they had and call it quits.

Our software has helped payment processors reduce their merchant abandonment rates by up to 70%, providing almost instant approvals so merchants can offer the kind of service the market expects. As the demand for real-time payments intensifies, merchants will continue to look for ways to refine their digital payment procedures, prioritizing speed and efficiency.

Ability to scale with a simple KYC solution 

What do forward-thinking PayFacs and ISOs have in common? They don’t just plan for now, they plan for the future. And they know that outgrowing their infrastructure will keep them from realizing that future.

The beauty of automating KYC and other onboarding and underwriting processes is that those processes can then grow alongside your business. With a strong and secure KYC foundation in place, you’re well-positioned to seamlessly expand your merchant client list without increasing your risk or sacrificing service. 

Our payments partnership

Your KYC is only as good as your KYC tools. By teaming up with KYC SiteScan, Merchant ScanXpress offers full-service payment processing that doesn’t just keep you compliant but also kicks your operational structure into high gear with speedy approvals, customized risk profiling, and frictionless merchant onboarding.

Get started today by booking a demo of how the Agreement Express software can transform your onboarding and underwriting processes.