KYC or Know Your Customer is a part of the verification process used by banks and other financial service providers to ensure they know who the customer really is. The idea is to reduce occurrences of fraud and default.
Here is our short post on everything you need to know about the KYC verification process in the world of personal finance:
What is KYC?
KYC is the process of ensuring that only genuine customers are enrolled on the services of an organization. It is done by checking a subscriber’s identity and address.
The basic purpose of the KYC verification is to check that no legal and laundering activities are carried out. It is via using any of the services of a concerned company by a customer.
KYC is done by submitting documents like an Aadhaar Card that can prove your identity and address because a form is filled at the service provider and after verification is done, the KYC process gets complete. It is after the authenticity of the user is established.
What is eKYC and its verification process?
eKYC stands for Electronically Know Your Customer, which is a digital way to conduct the KYC process. It takes less time to do eKYC. It is because the verification of a customer is done via Aadhaar.
A One-Time Password (OTP) is generated via the UIDAI portal of India and sent to a customer’s mobile number. Once this OTP is entered in the eKYC, the verification process gets completed quickly.
Nowadays, a large number of companies opt for eKYC verification online.
It is because it establishes a customer’s identity in no time and helps organizations add more customers into their folds faster.
Overall, the eKYC process is less complicated than physical or in-person KYC verification.
Why should you get your KYC done?
You are now aware of the concept and significance of KYC and types of verifications like offline and online.
Many people have this question: why should they get their KYC done?
Let’s understand it via an example.
Suppose you wanted to carry out a financial transaction with your bank, and if your KYC is not done, you may not complete it.
Why? It is because your bank has no information about your identity and address. Yes, it is not aware of the transaction that you want to complete is legal or not.
Since they don’t have any knowledge of your authenticity in terms of address and identity, they don’t let you transfer the money.
It is where getting your KYC compliant becomes so vital.
Once you are KYC verified, a financial institution is sure of your identity and allows for the transaction to be completed.
KYC verification also lets your bank know that the money transferred was not done for legal and laundering related purposes.
There is another essential reason to get your eKYC verification done. It is to ensure that a bank or other service providing company lets you register for their services.
You may not be able to open an account, register for a Demat account, and apply for a loan and more. Similarly, a cellular company may not enrol you into their network by offering you a new SIM Card if your KYC is not done.
Banks and similar companies also continue updating the KYC details of their older customer. It is a way to ensure that existing customers are using their services only for legal purposes.
Nowadays, it has become mandatory to carry out a prospective customer’s KYC. New-age companies are also doing video KYC of their customers.
They video call their customers and ask them to hold documents to ascertain their identity and address. It helps them complete the process in no time.
Bajaj Finserv offers pre-approved offers on personal loans, home loans, business loans and more. It is to simplify loan processing and make it less time-consuming.