Understanding KYC and its 5 Benefits You Need to Know

Understanding KYC and its 5 Benefits You Need to Know

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Understanding KYC and its 5 Benefits You Need to KnowIn the financial sector, there is a term called KYC. Perhaps those who are already struggling in the business field are familiar with the term. However, what if you are just getting into the business? KYC is an acronym for Know Your Customer. That is, you need to recognize the character of consumers so that they can provide the best service.      

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KYC plays an important role in the business world. To find out more, see this article, starting from the definition, objectives, and legal basis, to the benefits of KYC in financial technology.    

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Understanding KYC    

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In general, KYC is a principle applied by banking institutions to monitor the activities of their customers. Before supervising, banking institutions first know the identity of each individual. KYC plays an important role during customer registration because it must know the information clearly and in detail.    

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When in the registration session, customers must fill out an online form. Why do you have to go online? Because it is easy to do the tracking because the automatic data has been entered into the system. In addition, avoiding corruption, money laundering, and other crimes as well as guaranteeing transaction security is quite good.      

If there is a product or service that does not take advantage of online technology, it will most likely be a loss for the customer. In addition, it is very possible to be used by irresponsible people. This will be a bad signal for banking institutions and customers.      

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KYC Destination      

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Sumber: freepik.com    

After understanding the meaning of KYC, you also need to know the purpose of KYC. Because, KYC is an important principle for banking institutions, including its benefits, which include:    

• Make it easier for Bank Indonesia to monitor and supervise the activities of customers registered with financial institutions.    
• Make it easier for Bank Indonesia to recognize and understand the behavior of its customers.      
• Useful to avoid the presence of corruption, theft, or theft of funds.      
• Bank's internal monitoring system for all customer activities that have been carried out.      
• Protect the bank from various risks in the implementation of the customer's business.    
• All information held by the bank will be used as investigation material when there are indications of theft or laundering of funds.      

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KYC Legal Basis    

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KYC is a policy carried out by financial institutions and is supervised by law so that it has a strong foundation when monitoring customer behavior. The legal foundations include:    

• Law of the Republic of Indonesia No. 8 of 2010 concerning the Prevention and Eradication of Money Laundering.    
• Regulation of the Minister of Finance No. 30/PMK.010/2010 concerning Application of Know Your Customer Principles for Non-Bank Financial Institutions.    
• POJK Number 12-POJK.01-2017 concerning the Implementation of the AML-CFT Program in the Financial Sector.    

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How KYC Works    

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So that you know that KYC is an important policy in financial institutions, you need to understand how KYC works, namely:    

• The customer will upload his/her data in a document that has been prepared by the bank.    
• Determine the schedule for meetings (online or offline) between the customer and the relevant financial institution provider.    
• Make video calls to relevant financial institution providers.    
• Checking customer finances so that banking institutions understand the ability of customers to borrow funds. For example monthly earnings or transaction history    

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KYC Benefits      

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After understanding how KYC works, you also need to know the benefits of KYC, namely:      

• Banking parties will know and understand their customers more deeply, intensely, and clearly.    
• Helping banks or banks to understand the character of their customers' transactions.    
• Recognize and measure the risk of each customer in the event of money laundering or theft.    
• Protect customers so that there is a guarantee of security when customers transact.    
• Data verification will be more efficient and cost-effective.      

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As a policy that has just been implemented in several banking institutions, KYC is one of the policies that require more effort to obtain overall customer data. Therefore, appropriate action is needed to do so because not all customers are willing to provide their data holistically to banking institutions.    

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When you understand the meaning, purpose, legal basis, benefits, and how KYC works, you can apply for a business loan. If you work in a financial institution, implement a Brick verification solution to make the e-KYC process faster and more convenient for users. ***