HomeProductsCRMKnow Your Customer (KYC) Explained: A Strategy to Avoid Fraud

Know Your Customer (KYC) Explained: A Strategy to Avoid Fraud

The widespread use of technology, especially the internet, in everyday life requires humans to set standards and boundaries to prevent fraud. Therefore, Know Your Customer or KYC was created. Broadly speaking, KYC is a practice that companies undertake to verify the identity of their clients in accordance with the applicable legal requirements. This is the first step in a healthy customer relationship.

To learn more about KYC, see the explanation below which discusses its meaning and benefits.

You Must Know Your Customer

KYC is the process of identification and verification of the identity of a client in which a series of controls are applied to avoid having commercial relations with dangerous people associated with crimes, such as terrorism, corruption, and money laundering. The process includes verifying that clients are who they say they are, and then granting access to the product or service they need. You can verify clients using identity cards, documents, or biometrics.

While it can apply across a wide range of sectors, KYC is usually relevant in the world of finance and banking, as well as related fields, such as insurance, real estate and trading. Performing KYC can be offline or online through e-KYC, which is a remote and paperless process to reduce costs and avoid bureaucracy that usually takes a long time. (FYI: using ERP Software also reduce operational costs and save time.)

Related article: Customer | Definition, Types, and Characteristics

Benefits of KYC

Client identification and verification before establishing a business relationship certainly brings benefits to the company, including:

1. Help lenders carry out risk assessments

Before giving a loan, you have to do a background check to make sure the recipient is trustworthy and eligible for a loan. KYC assists you in identifying the financial and asset history of potential recipients.

2. Prevent fraud

Many frauds occur because of identity fraud. By doing KYC, you can check if the client’s identity is what they say they are.

3. Steer clear of money laundering and other criminal acts

Money laundering is the illegal process of making large amounts of money generated by a criminal activity, such as drug trafficking or terrorist funding, appear to have come from a legitimate source.

4. Bring stability and investment to the country

If financial institutions are able to carry out their duties as collectors and distributors of funds properly, then public trust in the financial framework will grow.

5. Able to provide more loans

A good reputation leads to financial organizations being trusted to make loans to a large number of people. It adds to the profits of financial institutions as well. (Here’s another way to increase profit: use technology in the form of Sales Management Software.)

Also read: What is CRM Software? The Definition, Purposes, Features, and The Benefits for Your Business!


The mode of crime is becoming more sophisticated as time passes. Therefore, you must strengthen your security by implementing KYC to prevent fraud by clients that can harm your business.

Another goal of implementing KYC is to maintain the relationship between the client and the company. These relationships are important for the survival of your business. For easy relationship management with customers, you can use CRM Software from HashMicro. Our CRM software has various features, such as sales pipeline management, revenue forecasting, and sales report generation, which help you to increase customer retention and lead conversion.

Interest in getting savvy tips for improving your business efficiency?

Viandita Shaquina Arlan
A learner who is passionate about exploring new things and meeting new people. Currently working as Junior Content Writer at HashMicro.


Please enter your comment!
Please enter your name here

Looking for software system to improve your business efficiency?

Get a free consultation with our business expert by filling in this form!


Rachel Panjaitan
Typically replies within an hour

Rachel Panjaitan
Looking for a Free Demo?

Contact us via WhatsApp and let us know the software you are looking for.

Claim up to 80% Productivity Solution Grant for various HashMicro Software!
Book a Demo by WhatsApp