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Simplified Guide: How Online Businesses Can Perform KYC Verification in 3 Steps

Author: Shufti ProTime: 2024-01-26 19:55:00

Table of Contents

Introducing KYC (Know Your Customer) Identity Verification

KYC, which stands for Know Your Customer, is a regulatory requirement that banks and financial institutions must fulfill by identifying and verifying the identity of their customers. KYC verification helps online businesses in several key ways:

  1. Verifying customers' identities to prevent fraud and financial crimes

  2. Complying with KYC and AML (anti-money laundering) regulations

  3. Building trust and security with customers by validating their information

What is KYC and Why is it Important?

KYC refers to the process where a business confirms the identity of its customers and assesses any potential risks associated with them. KYC rules require due diligence procedures to establish customers' true identities and ensure they are who they claim to be. KYC verification is important for the following reasons:

  • Prevents identity theft, fraud and scams
  • Ensures compliance with AML and KYC regulations
  • Builds trust between businesses and customers
  • Protects the business from inadvertently participating in illegal activities

Benefits of KYC Verification for Online Businesses

Online businesses stand to gain several advantages from performing thorough KYC verification:

  • Minimizes business exposure to identify fraud and theft
  • Safeguards the business from financial crimes like money laundering
  • Gives customers confidence in the business by validating identities
  • Meets legal and regulatory KYC and AML requirements globally
  • Enables secure online transactions and minimizes fraudulent payments

Step 1: Collecting Personal Information from Customers

The first step in the KYC verification process is collecting personally identifiable information (PII) from customers when they create an online account or register with the business.

This customer data lays the foundation for identity verification by gathering key details upfront during onboarding.

Types of Personally Identifiable Information (PII) to Obtain

Various types of PII should be collected from customers during initial registration:

  • Full legal name (first and last)
  • Date of birth
  • Email address
  • Phone number
  • Government identification numbers (Social Security Number, Passport Number etc)
  • Financial information (when applicable)

Safely Storing Customer Data Under GDPR

After collecting sensitive customer PII, it is vital to safely and securely store this data to remain GDPR-compliant. Measures such as encryption, access controls and data minimization should be used to protect customers' personal data and privacy.

Step 2: Requesting Supporting Identity Documents

Next, the online business requests identity documents from the customer to validate their information.

Accepted KYC document types include passports, government IDs, driver's licenses and credit/debit cards. Images or scans of these documents are provided by the user.

This step verifies that the customer is who they claim to be and that the personal details they initially provided are legitimate.

Accepted KYC Verification Document Types

Common identity documents that can be used for KYC verification include:

  • Passports
  • National ID cards
  • Drivers' licenses
  • Tax identification cards
  • Credit or debit cards

Importance of Document Validation

Validating users' documents is critical for confirming identities and guarding against identity fraud. It ensures that personal information matches the name, details and photo from a trusted, legitimate document.

Step 3: Verifying User Information Against Documents

The final step of KYC verification is matching the data and details customers initially provided against the information extracted from their identity documents.

First, optical character recognition (OCR) technology is used to quickly scan and digitize text from ID images into readable, extractable data.

The personal details input earlier can then be checked and verified against the OCR-extracted information from documents. If they match, the customer's identity is fully verified.

Using OCR to Extract Data from ID Documents

OCR, or optical character recognition, enables automated data extraction from ID images:

  • Scans image text into machine-encoded text
  • Detects fields like names, ID number, DoB etc
  • Outputs structured identity data for verification

Matching Input Data to Extracted Identity Details

The key final step is checking that:

  • Personal details users entered initially
  • Match extracted identity data from OCR scanning during document validation If this information lines up, the customer's identity is fully verified, validating KYC compliance.

Demo of ShiftyPro's KYC Verification Process

ShiftyPro offers an intuitive, automated KYC verification system that validates user identities in just three key steps:

Starting the Identity Check Flow

Users start the identity verification process by:

  1. Selecting the verification service
  2. Choosing a verification mode (e.g. passport, ID card etc)
  3. Specifying required identity details to authenticate

Uploading the User's Identity Document

Customers then provide a digital copy of their identity document via:

  • Scans
  • Smartphone images
  • Good quality photos containing:
  • Full legal name
  • Date of birth
  • Document number
  • Other printed info

Entering Required Personal Information

Next, clients manually enter personal details like:

  • Full legal name
  • Date of birth
  • ID document number
  • Any other data fields required for verification

Final Automated Data Verification

Finally, ShiftyPro automatically:

  1. Uses OCR to extract identity data from the uploaded document copy
  2. Compares this information to the details the user entered
  3. Checks for matches across all data fields
  4. If all details line up, the customer's identity is fully verified

Conclusion and Summary

In summary, robust KYC verification enables online businesses to:

  • Prevent fraud with identity validation

  • Build trust through customer information checks

  • Ensure regulatory compliance requirements are met

  • Securely onboard new users

  • Digitally verify identities from over 230 countries

Automated solutions like ShiftyPro allow KYC confirmation in just minutes without compromising accuracy or security.


Q: What is KYC identity verification?
A: KYC (Know Your Customer) verification is a process where online businesses confirm the real-world identity of new customers by collecting and validating personal information.

Q: Why is KYC verification important?
A: KYC helps prevent fraud, financial crimes, and money laundering by verifying users are who they claim. It also ensures regulatory compliance.

Q: What documents can be used for KYC?
A: Accepted KYC documents include passports, national ID cards, driver's licenses, and credit/debit cards containing identifying user details.

Q: How does OCR help the KYC process?
A: OCR (Optical Character Recognition) automatically extracts text and data from ID images instead of manual data entry, improving accuracy.

Q: What personal information is collected for KYC?
A: PII like names, DOB, addresses, SSNs, financial details helps confirm identities and check users against watchlists.

Q: How long does KYC verification take?
A: With automated solutions like ShiftyPro, KYC verification can take as little as a few seconds instead of days.

Q: Can KYC prevent online payment fraud?
A: Yes, robust KYC verification makes fraudulent transactions less likely by confirming real user identities.

Q: Does KYC help meet regulatory requirements?
A: Yes, KYC compliance meets AML, GDPR, and other global/local regulations for financial services.

Q: What industries use KYC verification?
A: KYC is critical for financial companies, e-commerce, cryptocurrency, gaming, real estate platforms, and more.

Q: Is ShiftyPro's KYC verification secure?
A: Yes, ShiftyPro uses industry best practices like encryption and data minimization to protect user privacy.