In the previous episode
KYC, or Know Your Customer, is the crucial process of verifying an individual's or company's digital identity in the course of commercial activity. As human beings, trust in our identity, i.e. who we are, is at the heart of our social interactions: whether renting or buying property, receiving our salary, shopping in the supermarket, opening a bank account, or even reimbursing medical expenses.
KYC is not a new concept, but the rapid digitization of our societies means we need to adapt it to new uses. At Memority, we're convinced that properly-tooled digital identity processes are a growth driver for businesses.
All too often, security is still seen as a cost-cutting exercise for the company and a source of friction for the user. At Memority, we are convinced that properly equipped security processes will not only be painless for users, but will also accelerate your business and generate trust and value. So, beyond the now-common uses of KYC for financial institutions, which mainly serve to reduce risk, let's look at a few use cases that KYCaaS can democratize.
Online merchants: lower insurance premiums
A market vendor could easily extend credit to a regular customer who has forgotten his wallet. But would he be as accommodating to a stranger? Probably not. The same goes for an online retailer.
In the event of non-payment, the online merchant must choose between absorbing the loss or activating his insurance, if any. The consequences go beyond the mere cost of the stolen item: bank charges, fraud fees, tarnished reputation, lost time, etc. Opting for a KYC (Know Your Customer) verification service can considerably reduce this risk. It guarantees that each buyer is who they claim to be, which reduces risk and can lower insurance premiums.
Similarly, an e-tailer selling products subject to age or nationality restrictions can prove compliance with the authorities' requirements.
However, for an e-tailer, every little problem can cost a sale. It is crucial that KYC triggers are carefully defined according to specific criteria: purchase amount, buyer location, purchase history, level of fraud observed on the platform, etc.
Sensitive sites
In certain industrial environments, such as nuclear power plants or SEVESO sites, it is necessary for visitors to provide a copy of their ID several days before their arrival. This facilitates security checks by the relevant authorities, but also entails the risk of confidential information being compromised.
As a consultant, I have worked with many clients who have requested this type of procedure before granting access to their IT systems. However, I remain concerned that my ID could end up stored on potentially vulnerable servers, exposing my personal data to the risk of fraud.
KYCaaS (Know Your Customer as a Service) offers a solution to this problem by avoiding the direct transfer of sensitive documents. This reduces the risk of leaks while speeding up the verification process, thanks to secure services connected to government agencies.
Registering a new supplier or partner
It's essential to know your business partners well, not just individuals but companies too, as we saw earlier. Some KYCaaS services can check the documents of legal entities, such as the Kbis, simplifying the verification process for new suppliers.
To make this process even smoother, consider asking your partners to enter their information directly into your tools, including the filing of the Kbis, which will be automatically verified, as well as an electronic signature process. An Identity Factory will automate this process, reducing the need to go back and forth between the two partners' departments. A final manual check can also be carried out if required.
Human resources for very small businesses: reducing risks
In 2022, an unqualified person was hired as a substitute teacher in an elementary school. She had used the identity of another teacher and submitted a false diploma. She taught for several weeks before being discovered by a colleague who had learned of it by chance via the press, where a similar fraud by this person had been reported previously.
Who would entrust their children to someone who had defrauded them in this way? The consequences go far beyond the financial aspects; it's a real image disaster for the director. The impact on the children could have been devastating. A background check process could have revealed from the outset that this person was not who she claimed to be, even before the first interviews. It could also have automated the validation of the criminal record, a simple process for the employer to initiate, and no more risky than the traditional mail-in application procedure.
However, small companies are not always equipped to carry out such checks. That's why professional chambers and trade unions are starting to provide their members with these tools, thereby strengthening trust with their customers.
Human resources from SMEs to very large companies: speeding up onboarding processes
Let's look at another human resources example, more suited to SMEs, ETIs and other large companies. The process of hiring or onboarding a temporary worker often begins by sending information by e-mail, which HR then manually re-enters into their HRIS tool. This information is then used to create accounts in the company's various IT tools, on the payslip, etc. Errors are frequent. The richness of our cosmopolitan environment means that we regularly come across names whose spelling can sometimes be a challenge. Or, more simply, surnames that are also first names, such as our Managing Director, who is just as often called "Francis" as "Grégoire"! What a waste of time to correct. Suggest that newcomers enter their information themselves, ideally via KYCaaS. This way, you can be sure that you're not making a mistake, and that the person is who they say they are.
To reduce friction and optimize costs, KYC can be triggered only after certain stages, for example just before the contract is signed.
Travel agencies: smoothing and simplifying take-off
During a family trip abroad, two women had entered their customary names on the online travel agency website, whereas their identity papers showed only their birth names. The tickets had to be changed urgently at the airport, resulting in unforeseen costs and unnecessary stress. If the agency had offered a KYC process, this discrepancy could have been detected as soon as the tickets were ordered, thus facilitating boarding.
Here we see that KYCaaS not only enables security checks, but also facilitates and prepares for subsequent physical checks. The amount of travel insurance could be calculated on the basis of whether or not a KYC check has been carried out.
Travel agencies: how secure is personal data?
The hacking of a travel agency also revealed the lack of consideration managers have for our identity documents. Tens of thousands of copies of identity documents have been stolen, and will now be used to the detriment of their owners.
Here we see another advantage of using KYCaaS: identity documents are not retained by the recipient. He only knows the necessary and sufficient information: surname, first name, date of birth, address, gender, etc. This data is deemed reliable and theirs to keep. This data is deemed reliable, and its protection is facilitated by the fact that it is handled by the KYCaaS service provider.
Marketplace and matchmaking services: reducing the risk of fraud
An acquaintance recently lost €22,000 on a well-known private reseller website. He wanted to buy a car and thought he was protected by the service's secure messaging system, except when the seller gave him a document that caused him to leave the service. Instead of entering his RIB in the secure space, he entered it on a falsified site. Obviously, all the documents previously communicated by the scammer, from his identity card to the vehicle registration document, had been stolen from another victim. So, yes, the buyer lacked vigilance and shouldn't have paid such a large sum without actually seeing the car; but if KYC were imposed by the resale service between private individuals, would this type of fraud still be possible?
Between the seller whose identity has been validated and the one who hasn't, which would you choose? Between the carpooler who has proved who he is, and the unknown one?
Health
In France, the Vitale card entitles you to access healthcare. However, it does not contain sufficient information to verify the identity of its bearer, which can lengthen verification and hospitalization times, among other things.
In conclusion
Real estate agents, doctors, rental companies and many other professions can also secure and streamline their processes thanks to KYCaaS. While many other uses have yet to be invented, choosing a service that increases trust between the various protagonists in a transaction is not just a financial issue, but is becoming a matter of convenience. Memority's positioning at the heart of an organization's identity and access processes makes it easy to integrate. The question remains as to the trust that can be placed in these services: are they reliable, what about advances in generative AI, etc.? Our opinion in the next article!
-> To discover the first episode of our KYC series, click here.
