How to Integrate a Custom KYC Solution Into Fintech Software

Regulations such as the Bank Secrecy Act (BSA), the 5AMLD, and FATF guidelines compel Fintech companies to integrate AML/KYC into their products.

Try a ready-made solution if you’re developing Fintech software for online/mobile banking, loan origination, investment management, or payment processing and don’t want to bother developing an identity verification module yourself.

Modern KYC systems are consistent with current standards, feature-rich, and intelligent, and they address a variety of security concerns. To top it off, their integration is painless – at least, that’s what every vendor claims.

There may be some obstacles and considerations along the route. As a result, our job is to warn you about the traps to avoid when selecting a KYC integration partner.

Security challenges in Fintech that custom KYC solves

First and foremost. Why can’t you just distribute your Fintech software without going through the KYC process?

The European Commission identifies fake/forged identification, non-valid ID paperwork, the possibility of an impostor presenting the identity document, and the risk of inaccurate information during on boarding as major KYC concerns.

The following are the security problems that KYC solutions must address, according to Deloitte and The Paypers.

1. Securely collecting clients’ data, checking the accuracy of the information

Prior to the global epidemic, banking institutions required physical ID documents and conducted manual onboarding. COVID-19 compelled banks to adopt digital and ensure a secure and user-friendly full-cycle online procedure. When registering, the client confirms their identity, fills out personal information, and uploads documents to their profile. Fintech software uses several technologies, like as OCR, to assess the accuracy of documents (Optical Character Recognition). Online onboarding, according to experts, may be even more secure than physical ones.

2. Preventing impersonification frauds

The global pandemic fueled an increase in internet criminal activities, including impersonation scams. KYC solutions employ Knowledge-based Authentication or Facial Recognition methods to ensure financial organisations that their customers are “who they claim they are.” Face and fingerprint identity checks have security flaws, but liveness detection overcomes this.

3. Verifying the customer compliance

Background checks for AML/CTF are based on static client data.

Manual data gathering and verification methods, as well as additional due diligence inspections, can take several days. Experts can focus on deeper examination and challenging issues because automated tools deliver quick results. Artificial intelligence (AI) and machine learning (ML) technologies aid in the handling of high-volume, recurring cases.

Not only are AML modules utilised for initial onboarding, but they are also employed for secondary checks. All clients are assigned precise risk ratings, and a financial institution understands how and where to best invest its resources.

4. Ensuring the legal status of documentation

KYC suppliers offer e-signature creation and verification modules to make the entire client service cycle more frictionless and faster. Otherwise, banks will have to use a third-party service to check that contracts and papers are legitimate.

Summary

The beauty of pre-built KYC solutions is how simple they are to integrate. You have everything you require, including well-documented APIs and SDKs, implementation support, and a rigorous testing regime.

However, there are crucial factors that can cause problems during or after integration and determine the project’s fate.

Vendor compliance with global KC standards and laws, server capacity needs, support for various identity verification methods, integration choices (APIs, SDKs, or KYC as a service), and the lack of vendor databases or testing regimes are only a few of them.

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