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Know Your Customer: How can organisations effectively verify identity in mCommerce

KYC is a challenge for many organisations operating in the mCommerce space. Regulators, like operators, banks, and government bodies, generally have limited experience in mobile payments and simply rely on industry movement and existing rules for older types of transactions. However, as the line blurs between typical operator services and those that are considered to be more a part of the financial services industry, operators need to make sure they understand exactly what Know Your Customer (KYC) really means and have an effective KYC system in place.

KYC doesn’t just mean fraud prevention; it also encompasses other key aspects of financial security, including; anti-money laundering, combating the financing of terrorism and preventing identity theft – All equally important reasons why your KYC processes need to be effective. There is no global standard for KYC regulations yet, but in many developed countries, most of the population has already been through some form of KYC (whether they’re aware of it or not!).

Mobile operators need to work with regulators to implement a KYC process that works for their country. Many mobile operators are required to perform KYC, however the KYC they perform is not necessarily up to the same standard as a standard bank KYC process.

Many operators, banks and even central banks have had to really look at different ways to implement KYC for mobile commerce, as they simply cannot follow rules that may be in place for a “banked” customer. While most people who have a history of banking, paying bills, driving and so on typically end up on databases that attest to attributes such as their creditworthiness, there are significant obstacles in identifying customers who are not in this category.

People who don’t use online billing or are not documented via trusted credit-reporting sources, make it harder to find reliable data about them. This makes it even more important for mobile commerce service providers to ensure that their KYC process is thorough and that they truly do “know your customers.”

As mobile operators in emerging markets have grown, so has their agent base. Many of the strict trading rules and regulations that govern retail in the established economies are still not present in the emerging markets. It is not uncommon for a high percentage of fraud to take place in the emerging markets, as the retail network itself is still in its infancy.

Hence, it is very important that the agent network is capable of performing the KYC process correctly and that the service provider minimises the risk of rogue agents poorly performing a KYC— or worse, performing outright fraud.

Perhaps your KYC implementation will consist simply of a photograph or a signature taken on a mobile device and stored in a database—or it could be a points system that requires some compliance; either way, it is a crucial step in the mobile commerce process. Time and care should be taken to reach out to regulators before you finalise your mobile commerce plan.

For more information, or to download the Sybase Mobile Commerce Guide 2012 – click here:

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