KYC (know your customer) is the compliance process of verifying who your customer is before you onboard them or move money on their behalf.

How it works

Typical KYC collects legal name, date of birth, government ID, and sometimes a selfie or proof of address. Vendors run checks against sanctions lists, politically exposed persons databases, and fraud signals. Risk tiering means low-risk retail users get lighter friction; high-value or corporate accounts get enhanced due diligence.

In venture contexts, KYC shows up when you launch a wallet, brokerage feature, or fund subscription portal — not only at banks.

Why it matters

• Founders: Bad KYC either blocks signups or creates regulatory exposure. Build vendor integration and retry flows into MVP timelines for any money-moving product.
• Investors: AML failures can freeze growth, force costly rebuilds, or kill banking partnerships. Ask who owns compliance and how false positives are handled.

Vendor selection matters: Stripe Identity, Persona, Alloy, and bank-native KYC each trade off coverage, cost per verification, and international document support. False rejections on legitimate users hurt conversion; manual review queues need staffing.

Corporate KYC for B2B fintech adds beneficial-owner identification and entity verification — heavier than consumer flows.

Common mistake

Treating KYC as a one-time checkbox at signup. Ongoing monitoring and periodic refresh are part of a full AML program.

Practical takeaway

Treat KYC as product infrastructure, not a compliance afterthought. Measure conversion drop-off at each verification step and iterate on copy, document types, and retry flows — the best compliance program minimizes false friction.

Related ideas

• AML and sanctions screening
• Embedded finance partnerships
• Accredited investor verification for fund raises