Glossary
What is KYC?
KYC, or know your customer, is the identity check financial firms run before opening an account or moving money. See the steps and what to expect.
Updated · By PayToMe Editorial
KYC stands for know your customer. It is the process a bank, payment provider or other financial firm uses to confirm who a customer is before opening an account or moving money. The goal is to prevent fraud, money laundering and other financial crime.
How it works
Regulators in many countries require financial institutions to verify their customers. In the United States, banks follow rules rooted in the Bank Secrecy Act. Other countries have comparable anti-money-laundering laws. The exact rules differ by place and by the type of service, so providers set their own requirements within the law.
A typical KYC check has a few steps:
- Collect details. Name, date of birth, address and a tax or national ID number.
- Verify identity. You upload a government photo ID, and sometimes take a selfie so the provider can match your face to the document.
- Screen. The provider checks names against sanctions and watch lists.
- Decide and monitor. You are approved, asked for more information, or declined. Providers may keep monitoring activity afterward.
For a freelancer or small business, KYC shows up when you connect to a merchant account or sign up with a payment processor. Until the check is complete, you may be able to create invoices but not receive payouts. If you are registering as a company, the provider will usually also ask about the business, which is covered in KYB.
Tips for a fast result: use a clear photo of an unexpired ID, make sure the name matches your bank account exactly, and keep your address documents recent.
Example
A freelance photographer signs up with a payment provider to take card payments.
PayToMe is in public beta, and its online payments run through Stripe, the payment processor, rather than PayToMe verifying identities itself. Meanwhile you can create professional invoices with the free invoice generator, which needs no verification.
Related terms
- KYB: the business version of identity verification.
- Merchant account: the account KYC usually unlocks.
- Payment processor: the company that typically runs the checks.
- Chargeback: a dispute risk that providers weigh during onboarding.