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Buzzwords & Bullsh!t: KYC


Buzzwords. I heard them while I was a banker and I hear them now working  in fintech. There are PLENTY of tech terms that make my skin crawl, but the one that I hear thrown around the most is infamous for anyone who has ever worked in a financial institution. It’s something that is engrained into your job in an FI and also is one of the most overused acronyms. It’s the ever so popular KYC.

KYC, or “know your customer”, was the phrase I heard most during my time in banking (besides the notorious CYA, “cover your ass…ets”). It is essential  every step of the way, from the minute a potential client is being prospected, through account opening or loan application, and even more as the relationship matures. But what does it mean?

As a teller (or banker), you have a laundry list of high-risk things that happen to you. There could be a robbery at any point, there could be a “bad” customer service experience (looking at you Gallop), or the most gut-wrenching of all… there could be a transaction that just seems…shady. This is where the mystical KYC comes in.

By using the KYC process, I would have not only a general understanding, but a meaningful gauge of what “normal activity” is for a customer’s account based on its history and the type of business it operated. Because of KYC, I could determine within a few seconds if escalations were necessary.

For a bank, as a whole, KYC not only attracts customers, but it lowers risk and strengthens the relationship you can create. Anyone who has ever opened a bank account has had a taste of KYC questions:

  • Will you be a heavy depositor?
  • Will it be in cash, check, or direct deposit?
  • Will you only go to the ATM or use mobile banking?

This is just the beginning, but the list goes on and on.

KYC becomes even more critical as time passes, especially when those “shady” transactions start showing up. If you suddenly start depositing thousands of dollars in cash every day after having a balance of $500 in your checking account for two years, it’s the teller’s job to immediately determine the cause and if it should be flagged as high-risk.

As I moved from banking and into the fintech world, I have seen a plethora of technologies that sell themselves as a foolproof KYC solution, some going even as far as filing the paperwork for you (spoiler alert: not a good idea). Others are looking at something I truly believe will lower risk and fraud for financial institutions: KYCC, or “know your customer’s customer”.

KYCC is analyzing, for example, a small mom-and-pop convenience store at a more meaningful level. By analyzing (through a tech solution or by hand) the types of customers and vendors a business is working with, I can determine if the funds and transactions showing up in the account make sense. Did you switch POS providers? Why? Did you hire a new employee who only wants to be paid in cash? Did you suddenly sell three times the number of cigarettes you previously did? Why?

Imagine you’re a banker who manages hundreds of business accounts. How would you truly know each of your customers? How would you have enough time in your day, while prospecting for new clients, arranging loan documentation, managing walk-in customers, and taking conference calls?

This is when KYC and KYCC becomes impossible to do by hand.

Fintech solutions, such as ours (shameless plug), takes the mundane task of organizing all the data you have as a banker and delivering it in an actionable way. KYC has now become not a bad word, but an investigative tool that can CYA and potentially increase your sales through more thorough relationship building. It’s not taking the place of a banker, but arming them with tools to uncover the facts in those “shady” transactions every bank employee has faced.

About the Author Paige Reimers

At NCS, Paige oversees the product team, business operations, as well as client and staff onboarding. She started her career in compliance and operations at both retail and commercial financial institutions. There, Paige learned the importance of risk management and KYC (know-your-customer) and saw firsthand the time and effort it takes to complete ODD (ongoing due diligence) and maintain a healthy high-risk banking program. At NCS, she works hand in hand with the product team to develop and enhance technology solutions to support bankers and regulators in markets across the country.

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