As the POS lending industry grows, it is beginning to get regulatory attention that has already been applied to traditional banking and lending institutions and products. These regulations help protect consumers from lending practices that are either purposefully predatory or work out to the detriment of most consumers over time. These regulations are vital when coming off the heels of a year like 2021, where fraud losses topped $5.8 billion, a 70% increase from 2020.
Know Your Customer (KYC) requirements, also known as Know Your Client requirements, are rules that mandate that banks and lenders make an effort to verify a credit applicant's identity and ability to repay before doing business with them. The identity aspect is what helps avoid cases of fraud, while the ability to repay helps avoid abnormally high cases of default.
To help lenders understand exactly what KYC requirements are and how they can help minimize fraud, we are going to cover:
- What KYC requirements are.
- How banks and lenders can make compliance more consistent.
- How to get started within weeks.
Let’s dive into each and give lenders the best idea of how to improve their fraud protection through KYC compliance.
What Are Know Your Customer Requirements?
Know Your Customer requirements are additional levels of security put in place in order to identify credit applicants and thwart potential fraud cases.
While fraud and default seem like consumer issues, they have obvious negative impacts on the lender as well. With an entire department dedicated to this issue, fraud cases cost lenders time and money to sort out, even if funds are insured. Defaults are more straightforward losses for lenders, as they aren’t getting the money they are owed from a customer.
How Banks and Lenders Can Improve KYC Compliance
Most financial institutions do their best to comply with KYC requirements, as there is an obvious benefit to both them and their consumers when they do so. The issue is there is a limit to what lenders can accomplish on their own. Failure to comply in every case opens up a higher risk of hefty fines, fraud, and default. Luckily, there are software tools that can automate much of the process, improve fraud detection capabilities, and obtain more comprehensive information on potential clients.
While we can’t explain how every tool accomplishes this goal, Skeps’ lending platform does exactly this, and we can explain how we do it. Our platform uses pre-built modules that pre-fill applications that are linked to fraud detection and KYC sources like Lexis Nexis, Emailage, and others. We automate this process so that it can happen concurrently with regular applications that clients always have to fill out, putting all information through extra layers of security and compliance to ensure that no employees have to take the extra time to do so manually.
Improve Know Your Customer Requirements Compliance With Skeps
Skeps offers a comprehensive, end-to-end consumer financing platform that helps businesses modernize their entire payment process. Working with an entire network of established lenders, we go above and beyond one-click payment, also offering a one-click application process for several different types of consumer financing, including:
- Installment financing payment plans
- Co-branded credit cards
- Consumer loans and leases
If you want to add an extra layer of security with KYC and fraud protection and are looking to partner with a forward-thinking fintech company that will keep consumers' eyes on the purchase while offering best-in-class financing and security, Skeps is the perfect fit.