Know Your Customer (KYC) Technology and Why It’s Important

Know Your Customer (KYC) Technology is the process of gathering information about potential customers to assess the risk of doing business with them. It’s often used as a protocol for new client on-boarding, but continues into the business relationship through transaction monitoring, risk management procedures, customer retention strategies and more.

For example, as a merchant services provider, BankCard USA screens applicants to minimize the risk of fraud. We verify identity, check credit scores, reference industry blacklists such as MATCH, and more to assess the suitability of potential clients for our financial services. Merchant accounts are then monitored to ensure that customers aren’t using our services fraudulently, and to ensure that we provide the proper support for each unique business.

Applicant screening doesn’t mean it’s an end-all, say, if you have lower-than-average credit or negative business history (as long as it’s unrelated to fraud). In fact, we are able to cater to high-risk merchants thanks to KYC technology and Enhanced Due Diligence (EDD). EDD goes a step further by putting extra controls in place for higher risk clients so that we can get to know them better and tailor our service to meet their specific needs.

For example, instead of outright rejecting an applicant with a higher-than-average chargeback ratio, we may look into their chargeback history to see the reason codes, then offer a customized chargeback prevention strategy with their merchant account through an EDD program.

Essentially, businesses use KYC resources to confirm the identity of their customers and continue checking in on their activity to foster a mutually beneficial relationship.

It’s often used to enhance business relationships. For example, knowing your customer allows you to create personalized loyalty programs, marketing campaigns, product recommendations and other tools that promote connection and interaction between you and your customers.

An example of this is a subscription box business that chooses specific products it sends to customers based on what they’ve ordered in the past, what they’ve returned, and preferences they’ve set. This kind of personalized attention to your customers tends to earn their loyalty—and customers who are loyal to your company are more likely to recommend you to friends, so KYC technology not only helps you retain customers but also expand your reach.  

How Does KYC Relate to My Business?

While KYC technology is commonplace for financial institutions like banks and merchant service providers, it’s a helpful tool for any business. The more you know about your customers, the more protection you have against chargebacks and fraud, and the more you can cultivate ongoing customer satisfaction.

KYC technology is a great addition to any business, but for some it’s considered an industry best practice or even requirement.

For example, vape businesses who operate online deal with regulatory compliance challenges when it comes to underage sales. Governing bodies are taking action against offending companies, and the U.S. Food and Drug Administration (FDA) recommends using third-party KYC technology—namely, age verification software—to verify the age of customers before they check out. Many vape merchant account providers require this kind of software to provide online credit card processing services. is one example of such technology. It cross-references the customer’s name, address, and date of birth against U.S. databases in search of a match using the customer’s order information at checkout. About 90% of the time, it can instantly verify the customer’s age using this matching method.

If unable to find a match (about 1 in 10 cases), the software prompts the customer to upload a photo of their government-issued ID, which is manually verified by a live team to ensure information on the ID matches the rest of their order information.

Age verification software allows businesses to know the customer before fulfilling an order and comply with heightening regulations by preventing underage sales. By having an extra layer of identity confirmation, it also protects against chargebacks and fraud.

Customer-centric features are a quick checkout process and the ability to recognize repeat customers without prompting them to upload an ID if they already have. The seamless process and recall feature make it more likely that first-time buyers return to the same website for their next order.

All in all, KYC may come in technology form or a strategy your team of personnel takes on. It may look like a points-based bonus program with personalized rewards for your regulars, an applicant screening process, software that tracks individual purchasing behavior, regulatory compliance software—the list goes on.  

Our merchant account application process, with the help of KYC technology, is quick and efficient for merchants to complete while also effective in safeguarding our company from fraud and ensuring that your business has what it needs from us to thrive.

We offer same-day approvals and can have your business accepting credit cards (online, in-store, or mobile) in as little as one business day. We also offer complimentary integration support so that your payment gateway or POS works together with your other software or hardware.

Get Started