The Complete Guide to KYC Integration [Steps + Benefits]

The Know Your Customer (KYC) process in financial institutions is lengthy but unavoidable. 

On one hand, you want to ensure that your business mitigates risks arising from potential fraud. 

On the other hand, the process is labor-intensive, resource-consuming, and error-prone. 

A research report by Fintech Global concludes that 28% of firms still manually perform more than 50% of KYC reviews. 

But things are gradually changing, thanks to KYC automation. Banks and financial institutions can verify customer identities with superior efficiency, scalability, and accuracy. 

The key to KYC automation is KYC integration with a third-party identity verification provider. The following article discusses KYC integration and its central role in automated identity verification and AML compliance. 

What is KYC integration?

A KYC integration helps businesses meet identity verification requirements using a third-party identity verification solution provider. These integrations typically use KYC APIs to automate checking customer identities and ensuring compliance with anti-money laundering regulations.

KYC integrations connect with external data sources such as government databases and identity verification services to ensure smoother checks, faster accuracy, and minimal disruptions in the verification steps. 

Why is KYC integration essential for businesses?

KYC integration has multiple benefits for businesses. Let’s check them out in detail. 

1. Helps to stay compliant with KYC regulations

One of the primary drawbacks of manual KYC is that verifiers must keep up with the changing regulations. With every new update, they need to revisit previous user IDs and tweak them based on the new rules. 

KYC software significantly reduces this rudimentary work as it helps businesses comply with ever-changing regulations. The automation provides real-time updates to verifiers, scans hundreds of IDs in minutes, and ensures that the information in the customer IDs is accurate and up-to-date.  

APIs in KYC can even screen customers against watchlists, enforcement lists, and sanctions lists. Automating these processes prevents common mishaps and ensures you fulfill crucial checks like Customer Identification program procedures. 

2. A smoother onboarding process

The KYC process begins long before you onboard customers. You must gather data and validate customers’ Personally Identifiable Information (PII), including their name, contact information, address details, location, etc., which is crucial to initiating the KYC process. 

Integration with a KYC tool significantly reduces the time to verify these details. The APIs allow businesses to verify identities using facial detection, document scanning, and video verification features. The low friction in the onboarding process helps businesses deliver a superior customer experience while not compromising the efficiency of the process. 

3. Better protection against fraud 

With KYC automation using APIs, you’re saying goodbye to all the errors resulting from the manual verification process and ensuring better protection against digital fraud. Integrating fraud detection tools helps you identify phishing emails, fake identities, and digitally altered documents. 

For example, OCR API verifies documents with the central database and immediately flags any mismatch in the details. This reduces the chances of data breaches and fake document uploads, ensuring you don’t fall prey to identity theft. Similarly, deep fake authentication shows any bogus content, such as images, audio, and video, created for defamation purposes. 

4. Minimized administrative work 

Your employees will thank you for this, as KYC integration reduces mundane work like manual data entry and reviews. At the same time, it improves the quality of their work, as they have to intervene only when a manual review is needed after the tool flags a particular case.

Third-party KYC integration providers offer manual and AI-powered identity verification options. This combination provides even higher accuracy in data checks and significantly reduces the administrative work of the employees. Just ensure you choose a KYC tool that adheres to compliance and can efficiently combat fraudulent activities without requiring extensive human intervention. 

5. Cost-effective customer onboarding

With KYC integration, you save time and human resources while significantly reducing costs while onboarding customers. KYC software automates customer due diligence and eliminates the costs associated with paperwork, overhead, and administrative tasks. 

The identity verification tool helps maximize conversions by reducing drop-offs in the verification process. Centralized data management with KYC automation also minimizes customer onboarding redundancies and data correction costs. 

6. Increased scalability 

With a growing customer base, matching the accuracy standards with a manual KYC process is impossible. KYC integration with identity verification and AML tools allows financial institutions to onboard many consumers at scale without compromising on verification accuracy. It also enables them to enter new markets and launch new offerings and products cost-effectively. 

5 Steps for KYC implementation 

You can integrate KYC using the following steps:

1. Research KYC regulations 

KYC tool needs differ based on your scale of operations, location, type of industry, etc. Identify your regulatory compliance and the KYC regulations relevant to your industry and region. Define specific KYC requirements based on your customer base, risks associated, and business model. You have KYC third-party providers that specifically cater to financial institutions and provide customized services like AML compliance, bank statement OCR, etc. 

Don’t forget to add objectives for KYC integration such as compliance, fraud prevention, and customer onboarding in digital identity verification. If you set specific KPIs, you can measure the progress more effectively. This will also narrow down multiple options for you. 

2. Collect customer data 

What type of customer data do you need to collect? This data typically includes the customers’ names, ages, addresses, and identity documents. For example, as a logistics company, if your primary goal with KYC integration is to verify a driver’s license remotely, you need a highly accurate OCR document scanning tool that scans licenses and other identity documents. 

You’d also need a face verification tool or a selfie verification to match the person with their license picture. Based on your industry, decide the other data points you might need and collect the relevant data points. 

3. Choose a KYC and identity verification API provider 

Now comes the most crucial part. Choosing the right KYC API provider will ensure that you meet your KYC goals. Choosing a single end-to-end KYC solution is better for your business processes than relying on multiple vendors for KPIs. It helps you streamline the verification process and remove silos. Research and analyze various KYC API providers and qualify them based on parameters like 

• Verification features – verifies identity documents such as SSN, DL, passport, etc., performs facial recognition checks and liveness checks. 
• Scalability – provides geographical coverage and can handle large customer bases.
• Customer support – provides 24*7 seamless support and technical guidance.
• Ease of implementation – has a gentle learning curve and provides no-code workflows. 
• Compliance processes – has experience working with regulatory bodies and knows relevant regulations. 
• Data security – provides safe storage of data and data encryption. 
• Pricing – aligns with your budgetary goals. 
• Expertise – has experience working with a notable clientele. Check the number of users verified and service uptime commitment. For example, HyperVerge has verified over 700 million user IDs with a 95% auto-approval rate. 

To know how to select a KYC partner in detail, head on to the following article: How To Choose The Right KYC Partner

4. Integrate the KYC into your platform 

Once you choose your platform, you proceed with the integration process. 

• Integration 

Financial institutions integrate the KYC API into their systems, allowing seamless communication between the third-party provider and the company. 

• Data collection 

When a customer initiates opening an account, which requires an identity verification process, the financial institution collects customer data such as name, address, date of birth, and identity documents. 

• API request 

The company sends this collected data to the third-party KYC provider via the API.

• HyperVerge verification process

Third-party providers like HyperVerge use verification methods to validate the customer’s identity, including document checks, biometric authentication, and database cross-referencing.

• API response 

The provider returns a response to the financial institution, indicating whether the customer has passed the KYC checks or if further action is needed

5. Test and verify KYC integration

After integrating KYC automation, cross-check if it functions properly and verify data according to your standards. If you find errors or bugs, chances are there are some integration issues, and you can contact your third-party provider to look into the problem and resolve the issue. 

Example of KYC integration 

Automate identity verification processes with HyperVerge’s KYC integration 

KYC integration is needed for any firm that wants to streamline customer verification and onboarding. HyperVerge provides an impressive KYC tech stack that can help you decrease time and effort with manual onboarding and verifying customer documents. We have experience working with enterprise clients like L&T Finance and AngelOne and have verified over 700 million identities with a 95% auto-approval rate. 

A third-party API provider like HyperVerge allows you to build no-code workflows to initiate the KYC process. Book a demo to learn more about how HyperVerge can help you streamline workflows and optimize your KYC and AML activities. 

Frequently asked questions about KYC integration

How long does it take to integrate KYC automation?

It depends on the type of identity verification solutions you opt for and the complexity of the integration. A simple integration can take a few hours or days, while custom requirements in the solution can take a few weeks. 

Why do you need KYC integration?

It is easier to automate the KYC process than to do it manually. Third-party KYC API providers have a solution that fully automates customer onboarding. This saves you time and money, provides higher accuracy, and helps you stay compliant with AML regulations. 

What is KYC API? 

APIs are a way to integrate a KYC provider with a bank or other companies. They are designed to speed up and automate KYC tasks by integrating with external data sources.