Know Your Customer (KYC): What It Is and How It Can Benefit You
Digital merchants who know their customers are more likely to be successful. However, today's users are very focused on privacy and digital security.
This means that companies have to take additional steps to learn more about their audiences, for example, implementing a KYC strategy.
An effective KYC strategy allows you to learn more about each user and your customers in general. Independent online merchants have limited resources, so these entrepreneurs have to learn how to collect information from their customers in the most effective way.
This article will explain the meaning of KYC and the advantages that this process brings to your online store.
What is KYC (or know your customer)?
First, define KYC. What is it? And how can it help your company?
KYC is a process that consists of identifying your customers through data verification. It’s worth mentioning that these acronyms also refer to banking laws and regulations, but in this article, we will analyze the general definition of this phrase.
The acronym KYC represents the name of this process, "know your customer." For this reason, the terms "know your customer” and “KYC" are interchangeable.
KYC: A measure to improve your anti-fraud system
Online merchants can apply the know your customer process to their anti-fraud system.
If you incentivize your customers to open and activate accounts before completing a purchase, there's a good chance you'll drastically reduce the number of fraudulent sales.
If your e-commerce page is part of the financial, insurance, investment, or similar sectors, you should check if you have to comply with any KYC regulations.
E-merchants operating outside of these sectors may see KYC as an anti-fraud system. Therefore, the verification process may be less stringent and consist only of standard email verification.
How does KYC work?
Now that we know what KYC means, let's explore what this concept looks like in practice.
Merchants who use KYC as an anti-fraud system can verify their customers' accounts in many different ways. The most popular ways are via email or text message. You can use APIs from platforms like Google and Facebook to enable customers to create accounts quickly, allowing you to verify their identities simultaneously.
Advantages of knowing your client
This section will detail the advantages of knowing your customer for anti-fraud purposes.
1. Better risk analysis
Successful online traders typically implement a relatively simple yet effective risk analysis process. Through KYC, you can create a system that includes creating an account.
If a customer displays suspicious patterns of behavior and also doesn’t have an account, you should consider this a red flag.
2. Fast and efficient data collection
Large companies spend billions of dollars annually trying to collect information from their customers. On the other hand, most independent merchants still can interact on a personal level and collect information from their customers directly, thanks to KYC.
3. Less fraudulent transactions
As mentioned earlier, having a KYC strategy can reduce the number of fraudulent transactions processed on your page. This is achieved by applying account creation as part of your verification process.
If you offer your users a good incentive, such as a substantial discount or a free product, it should be worth checking out every order coming from customers that don’t create an account.
4. Improved customer experience
By knowing your customer, you can create a better user experience on your page, emails, and other interactions.
The information you collect through KYC reveals a wealth of information about your customers, such as demographic data, which can include the age and location of each customer. This allows you to create profiles that you can use to launch custom campaigns directed at specific segments.
Know your Costumer | KYC
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Know-your-customer strategies can reveal a wealth of information about your audience and help you create a more comprehensive anti-fraud system. If you want to know more about what KYC is and get to know other anti-fraud measures, stay up to date with our blog.
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