By Sodiq Lasisi
The need for trust and security has never been more paramount. Enter KYC, the three-letter acronym that packs a punch in the world of finance, technology, and beyond. Know Your Customer, or KYC, is more than just a compliance requirement; it’s the bedrock upon which the modern financial ecosystem is built. In this article, we’ll delve into the intricate process of KYC, uncover the compelling reasons behind its existence, and explore the best approaches for designers to ensure seamless integration, making it both user-friendly and secure. Strap in, because the world of KYC is about to come to life!
In the thrilling world of Tiered KYC, we’ve got three captivating categories:
Tier 1 — Inclusion Pioneers: No docs? No problem! Tier 1 welcomes the daring pioneers, extending financial inclusion like never before.
Tier 2 — Flexi-Finance Friends: For those who’ve got some documents but not the whole requirement, Tier 2 offers flexibility, opening the door to the financial club.
Tier 3 — Low Key Legends: These are the seasoned pros with all their paperwork in order, ready to dive into financial waters hassle-free.
With these tiers, the financial world becomes an all-inclusive playground. Buckle up for a wild ride through the tiers! 🚀💰
So, let’s break all of this down.
What is KYC and why does it matter?
KYC is a set of verification processes used by businesses and institutions to identify and verify the identity of their customers. In Nigeria, the KYC process is governed by regulations and guidelines from regulatory bodies like the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC), among others. These regulations are in place to ensure the security and integrity of financial transactions and services in the country.
Key Components of KYC in Nigeria
Identity Verification: The first step in KYC is verifying the customer’s identity. This typically involves obtaining government-issued identification documents, such as a National Identity Card, International Passport, or Driver’s License. Designers should create user-friendly interfaces for uploading and verifying these documents.
Biometric Data: Biometric verification, such as fingerprint scans or facial recognition, is increasingly used in KYC processes to enhance security. Designers need to ensure that the biometric data collection and verification processes are user-friendly and intuitive.
Embracing third-party Apps can streamline the collection of ID cards and Biometric data without the need for intricate designs. However, this choice involves a crucial dialogue among stakeholders. It delves into an institution’s risk appetite — probing whether they’re open to entrusting sensitive data collection to a third-party App. It’s not just about convenience; it’s about aligning innovation with security and trust
Address Verification: Some KYC processes also require proof of address, such as utility bills or bank statements. Designers should consider how users can easily provide and verify this information online.
We will look into the 3 tiers of account and the kind of information recommended by CBN to collect.
It is important to note that the CBN Recommendations for the collection of data can be done in innovative ways as long as the process of getting that information is compliant with the consumer protection regulation and The Nigerian Data Protection Act 2023 (The Act).
Here’s the scoop on Tier 1:
For Everyone: These accounts make sure even if you’ve got no fancy IDs or a huge income, you’re not left out in the financial cold.
Daily Limits: Your spending power is capped at 50,000 NAIRA, and you can stash up to 300,000 NAIRA. It’s all in line with the 3-tiered KYC Regulation.
The Info We Need: For starters, we need your passport picture, name, birthplace, gender, address, phone number, and more. The “etc.” part gives financial institutions the freedom to add a few extra touches to truly know their customers.
And here’s the magic: You can hand over this info electronically if you’re dealing with MMOs (Mobile Money Operators like Palmpay and Opay ) and MFBs (Microfinance Banks like Kuda). But for the big banks DMBs (Deposit Money Banks), you’ve got options — electronic or onsite submission.
For financial institutions, verification is the name of the game. It’s not just a formality; it’s the ultimate security guard against fraud, a legal duty, and the key to keeping the money mojo flowing.
So, what’s the design process for Tier 1 accounts? 🎨🔒✨ Let’s unveil the secrets!
The No-Questions-Asked Zone”
In the world of Tier 1 accounts, there’s a clause that’s as rare as a unicorn: “No evidence needed!” Yes, you heard it right. In some magical context, it means you don’t have to prove a thing or verify what your customers say.
But hold on, there’s a twist. This spell comes with a sprinkle of risk dust. If the info your customers dish out is more fiction than fact, you’re dancing on a fraud-infested tightrope, risking the wrath of regulators.
“Tier 2 Accounts: Unlocking the Power of Proof”
Step into the realm of Tier 2 accounts, where the stakes are higher, the rules are firmer, and the possibilities are endless. This isn’t your grandma’s account; it’s a powerhouse of financial prowess.
Here’s the deal:
Data Demands: Unlike the carefree Tier 1, Tier 2 wants proof. Your ID? It’s not just a formality; it’s a VIP pass, and financial institutions are keeping an eagle eye on it. But the best part? You can kick-start this journey from your couch or take the classic route, strolling into a bank.
Money Matters: Tier 2 accounts are where you level up. Your wallet? It can hold a lot more now. Plus, you get extra superpowers, like linking your phone to your account.
The magic numbers. You can send up to 200,000 naira sailing out of your account daily, and your treasure chest can hold a maximum of 500,000 naira.
For Tier 1 pioneers looking to move up the ladder, it’s simple: provide the basics, like your BVN, government-issued ID Card, and Passport Photograph. You can upload this info electronically or serve it up at the bank.
And here’s the twist: Unlike Tier 1’s no-questions-asked approach, Tier 2 means business. The info you share. It’s going under the microscope, matching up against the big databases like NIMC, INEC, and FRSC.
“Tier 3 Accounts: Where Boundaries Don’t Apply”
Prepare to be amazed, because Tier 3 accounts are the true marvels of modern finance. They’re the VIP cards to a world where limits are just a word, and your financial dreams have no boundaries. With a whopping daily transaction limit of 5,000,000 naira and the power to house an unlimited balance, it’s like having the keys to a money kingdom where your pockets know no bounds.
Now, about those requirements: Tier 3 wants to know you inside and out, and we’re talking legal name, permanent address, and where to find you when the world needs you. They want your digits — not just your phone number, but your email and even your social media handle. It’s all about leaving no stone unturned.
And here’s the twist: You’ll need just a Utility bill not older than 3 months to get upgraded to Tier 3. Background checks will be carried out by the compliance team, to avoid onboarding an individual who is a potential threat. They even want to check if you have any prominent public positions (PEP status) because they’re thorough like that.
PEP? That’s “Politically Exposed Person,” a fancy term for folks trusted with high-ranking positions, either here or abroad. But hey, that’s a topic for another day.
But in the design, you won’t find all of this. The reasons why they are are called background checks.
In the captivating journey through the world of KYC and Tiered accounts, we’ve unravelled the secrets, the twists, and the boundless opportunities that lie ahead. These tiers aren’t just numbers; they’re the keys to a financial world that’s secure, inclusive, and teeming with potential. So, whether you’re starting from scratch or eyeing that next-level upgrade, remember this: in finance, there are no boundaries when you’re armed with the right knowledge. Tier by tier, KYC is your passport to financial adventures, where the only limit is your imagination. 🚀💼💰