Who Does Your KYC Software Miss Out?
If you’re only using traditional sources of information in your onboarding, AML and KYC checks, you’re unknowingly closing the door to a significant percentage of potential clients. If you want to avoid excluding the thin-file demographic and make your KYC identity verification software more inclusive, innovative applications of data can help.
What Are KYC Checks?
Know Your Customer (KYC) is an essential element of the onboarding process. In short, it is the process of verifying that the information the user provides during sign-up is accurate.
This is necessary to avoid the financial damage of identity fraud. There is also a risk of the customer base becoming overwhelmed with completely synthesised personas.
KYC checks also keep the business in compliance with the 2019 Money Laundering and Terrorist Financing Regulations. Anti-money laundering (AML) procedures sit alongside KYC due to this joint objective.
How You Can Make Your KYC Solution More Inclusive
Verifying identity is no simple task – in the physical realm, checking if someone is real is as simple as holding up a valid photo ID next to their face, but the anonymity of the digital space presents greater challenges.
To be confident in the identity of who you deal with, your business requires verifiable information to check – the greater the detail and history, the more confident you can be. To fulfil this requirement, typical KYC software utilises data from one or more of the following sources:
- Credit history from Credit Reference Agencies (CRAs). Any loans, mortgages, credit accounts and payments made to each, come together to form a history of verified actions, which can help create an accurate KYC solution.
- Utility bills and council tax statements. These letters from external bodies help to prove name and address. If the same name and address exist on the letter as what the user provided during KYC checks, you can be more confident about their identity.
- Government documents, such as passport and driver’s licence. Much like proving identity when making a physical purchase, these documents come with a level of authority.
While these sources of information can provide compelling proof of identity within KYC software, they will leave a large segment of customers unable to prove their identity. These segments often fall on demographic lines, so far from being a random selection, KYC software using these sources may unwittingly exclude certain groups.
What Does It Mean To Be ‘Thin-File’?
The ‘thin-file’ demographic consists of individuals who have little to no credit history.
Due to this lack of credit history, CRAs will struggle to accurately verify the identity of individuals in this demographic. Despite being perfectly genuine individuals, businesses who rely on CRAs as KYC identity verification will have little confidence when setting them apart from fraudsters and synthesised identities.
This is a pervasive issue, especially among younger generations, who are least likely to have taken out loans, mortgages or credit accounts, and lack sufficient history even if they have.
According to Experian, over 5 million people in the UK have so little credit history that they are considered ‘invisible’ to CRAs. For businesses which rely on CRAs, this excludes roughly 8% of the UK population from your KYC solution, and potentially from becoming a customer at all.
Likewise, government IDs also have limited reach. The Office for National Statistics reports that 24% of the UK population do not own a UK passport, and the Electoral Commission estimates that 8% of the electorate lack any photo ID at all.
Demographics who are less likely to possess photo ID include:
- Ethnic minority groups
- People currently living in poverty and those from economically disadvantaged backgrounds
- Younger generations
Leaving so many people without a reliable way to verify their identity not only makes the service less inclusive but creates a significant obstruction to businesses, especially those which centre themselves on the above demographics.
These data sources also act to make KYC checks more of a chore for your customer than it needs to be, providing credit information and especially scanning in photo ID can cause unnecessary friction in the user journey. This is another cause of customer loss, as 25% of enterprises attribute most of their customer churn to friction in identity and authentication.
Taken together, these factors make one thing clear. If your business wants to make it easy for customers to do business with you, your existing sources of KYC data are not likely to be enough.
Identifying The ‘Thin-File’
There is a source of data which can be used in KYC software that has a much greater chance to identify the ‘thin-file’ demographic. This source of data takes advantage of the very medium the ‘thin-file’ demographic are using to interact with you and relies on something possessed by almost everyone.
A mobile phone number.
The data which mobile network operators (MNOs) associate with mobile numbers can tell you some useful information about the person it is associated with.
Once a user has provided information – including phone number – during KYC checks, you can compare the inputs against the information listed by the operator.
This allows you to check the accuracy of:
- First and last name
- Date of birth
- The format and network of the phone number
Such information is a great way to reinforce KYC software alone, but what makes it especially useful as part of KYC operations is the inclusivity.
While the ‘thin-file’ demographic might be less likely to have credit history or photo ID, they are much more likely to own a phone number. In fact, 96% of UK citizens own a phone, making MNO data one of the most all-encompassing forms of KYC data out there.
Additional Benefits of MNO Data in KYC Software
Inclusivity is not the only place where MNO data shines when used as part of well-rounded KYC software. Data which compliments the growing mobile channel allows your business to offer the best possible experience to everyone – mobile journeys are at their best with mobile data.
Other benefits of MNO data include:
Utilising MNO data also allows you to check for tell-tale signs of fraud, such as SIM or Device ID change, call forwarding, or if the device is registered as lost or stolen. With onboarding fraud and SIM-swap on the rise, MNO data plays a powerful role in protecting businesses and customers alike.
Friction from the user experience is reduced, as checks are performed in the background – besides the account information, all the user has to provide is a phone number.
By accurately verifying age, MNO data ensures only those who are legally eligible for your products and services can gain access.
How to access MNO data
Here at Phronesis, we have already done the hard work of partnering with the major MNOs to access their data and create versatile, customisable and inclusive KYC software solutions to enhance your business.
To find out more about bringing mobile network data into your business, book a free, introductory call. We would love to help you build the best KYC software. Alternatively, to find out more about mobile network data, sign up for our mailing list at the bottom of this page.