We have interviewed ChatGPT twice now, once to talk Insurance, and again to connect on health equity. As my mother always told me, once you are here three times, you are no longer a guest. With that in mind, I invited ChatGPT into my home office for a more personal conversation, which seems very appropriate since our topic is “Know Your Customer” or KYC. 

Welcome to my home! Can I get you a coffee or tea?

No, thank you. I am an AI language model and do not have the ability to drink coffee or tea.

Oh that’s right. But your manners have certainly come a long way since we last spoke. I wonder what else has changed. 

What’s new with you in the last 30 days?

I am an AI language model created by OpenAI, I do not have personal experiences or changes. My training data and abilities were updated until 2021 and I am here to assist with information and answer questions to the best of my ability.

Same ol’ ChatGPT, just wants to get down to business. Alright, let’s get to the topic of the day. 

For those who may not be familiar with the term, what is KYC?

KYC stands for “Know Your Customer” and refers to the due diligence process to verify the identity of a customer or client in a financial transaction. The goal is to ensure that the customer is who they claim to be and to prevent illegal or fraudulent activities such as money laundering or financing of terrorism. KYC procedures typically involve gathering information such as name, address, identification number and proof of address.

That makes sense! But I’ve heard it goes a bit deeper than that. 

Can you explain the three components of KYC?

Sure, the three components of KYC are:

  1. Customer Identification: Gathering basic information about the customer, such as their name, address, date of birth, and identification number.
  2. Customer Risk Assessment: Evaluating the customer’s risk level based on factors such as their country of origin, source of funds, and nature of their business.
  3. Customer Due Diligence: Conducting additional research and verification to confirm the customer’s identity and assess their risk level. This may include reviewing public records, financial statements, and other relevant information.

Overall, the purpose of these three components is to ensure that financial institutions have a complete and accurate understanding of their customers and their financial transactions, which helps to prevent illegal activities and protect against financial crime.

Do these requirements apply to Cryptocurrency?

Yes, KYC (Know Your Customer) requirements can also apply to cryptocurrency exchanges and other businesses that deal with virtual currencies. The process of verifying the identity of customers in the cryptocurrency industry is similar to traditional financial institutions and is intended to prevent illegal activities such as money laundering, financing of terrorism, and other financial crimes.

Oh I get it now. KYC is the latest in crime-halting practices. Maybe the newest crime drama, like “Law & Order: KYC”. 

No spoilers please, but does KYC stop the bad guys?

KYC (Know Your Customer) is a tool designed to help prevent illegal activities such as money laundering, financing of terrorism, and other financial crimes. However, it is not a guarantee that it will stop all “bad guys” from engaging in illegal activities.

KYC helps financial institutions and cryptocurrency exchanges to identify and verify the identity of their customers, and to assess their risk level. This information can be used to detect and prevent suspicious transactions, but it is not foolproof.

I am definitely going to watch this show. It is clearly ratings gold. Going beyond the hottest new crime drama, I am wondering what other use cases are supported by KYC initiatives. 

Does KYC have any applications that don’t involve preventing crime?

Yes, there are several other applications of KYC (Know Your Customer) that go beyond preventing financial crime. Some of these include:

  1. Customer relationship management: By gathering information about their customers, financial institutions and other organizations can build better relationships and provide more personalized services.
  2. Improved decision making: KYC can provide organizations with valuable information about their customers that can be used to make more informed business decisions, such as risk assessment and customer segmentation.

Overall, KYC has many applications beyond preventing financial crime and can be an important tool for organizations to build better relationships with their customers, comply with regulations, prevent fraud, protect data, and make more informed decisions.

Oh, that’s very interesting to me. It sounds alot like what we do here at AnalyticsIQ. Can we dig into the first point more? How can KYC be applied to improve customer relationship management?

KYC (Know Your Customer) can be applied to improve customer relationship management in the following ways:

  1. Personalization: By gathering information about their customers, organizations can provide more personalized services and tailor their offerings to meet the specific needs of each customer.
  2. Customer Segmentation: KYC information can be used to segment customers based on factors such as their risk profile, demographics, and financial behavior. This allows organizations to target their marketing efforts and provide more relevant products and services.
  3. Improved Communication: With accurate information about their customers, organizations can communicate more effectively and provide more relevant information, such as account statements, promotional offers, and other relevant updates.
  4. Faster Onboarding: By gathering all the necessary information up front, organizations can streamline the onboarding process and provide a more seamless customer experience.
  5. Increased Trust: By verifying the identity of their customers and protecting their personal information, organizations can build trust and establish a more positive relationship with their customers.

Overall, KYC can be a valuable tool for organizations looking to improve customer relationship management by providing more personalized services, improving communication, streamlining the onboarding process, and building trust with their customers.

Please list the data points needed for organizations to improve customer relationship management using KYC.

  1. Customer Identification Information (e.g. name, address, government ID)
  2. Contact Information (e.g. phone, email)
  3. Demographic Information (e.g. age, gender, education)
  4. Financial Information (e.g. income, transaction history)
  5. Behavioral Data (e.g. interaction history with company, customer preferences)
  6. Customer Feedback and Complaints
  7. Market Segment Information (e.g. target audience)

Oh cool, that is practically our data dictionary. Brands could combine our data with their first party data to fill in the gaps about the customers historic interactions with the brand and tell a complete story. You are making me feel really good about how we can help brands conquer their KYC goals! 

Obviously I think marketing is cool, and delivering better customer experiences is powerful, but let’s be honest, fighting crime is just better for ratings. 

Write the opening scene of the new show “Law & Order: KYC” focused on fighting financial crime, with one of the team members being a data scientist.

Scene: Inside a modern high-rise office building, a team of law enforcement agents and data analysts are gathered around a large conference table.

Detective Martin (lead detective): “Okay people, let’s get started. We’ve got a big one today.”

Data Scientist Lara: “I’ve been analyzing the data and I think we have a potential match for our suspect.”

Detective Martin: “Go on.”

Lara: “I’ve been tracking a series of suspicious transactions and there’s a pattern. I believe it’s a money laundering operation.”

Detective Martin: “Interesting. We need to dig deeper. We’ll need to track the source of these transactions, find out who’s behind this. Let’s make sure we follow every lead, every detail. We can’t afford to let these financial criminals get away.”

(The team nods in agreement and starts preparing for the investigation)

Detective Martin: “Let’s do this. Law & Order: KYC is in session.”

Eh, it’s ok. It may not make it past pilot, but you never know what may stick. And I’m not sure if you really understand what a data scientist does…

I have to ask… Who do you think will win the 2023 Superbowl? Philadelphia or Kansas City?

As a language model AI trained by OpenAI, I don’t have the capability to predict future events such as the winner of the 2023 Super Bowl.

Ugh, you are officially not invited to the office betting pool.

To learn even more about how predictive data helps financial services brands know their customers like they know their friends, check out our eBook.

Online illustrations by Storyset