The Methods for Doing Credit Verification and How Do They Work


The credit verification process is a continuation of the credit analysis process and must be carried out by the creditor company because the collection team or data collection team will have difficulty and cannot do much about the results of the initial credit process that are not good. This verification process aims to check the completeness and correctness of the information provided by the debtor to apply for credit.

The conventional verification process can be slow due to frequent interruptions and delays caused by congestion. Before a team of creditors can begin verifying assets, income, and employment, they must wait for consumers to complete a lengthy process, such as collecting tax return documents or letters, bank statements, and other information. Along with the times of development, information technology is getting faster, with the process of providing credit, especially the credit verification process for customers, which is also getting easier and faster.

Although the verification process procedure is different in each bank or financial service provider such as conventional and digital finance companies, it also depends on the type of credit and the amount of loan proposed by the prospective debtor. However, the financial industry such as banks and other financial service providers use methods such as Know Your Customer (KYC). KYC is a process commonly used in finance to verify identity and identify customers.

The verification with the KYC method can be done offline or online (e-KYC), just like opening a bank account. The first KYC process usually begins with the data collection process, such as names, identification numbers, addresses and contact numbers. The KYC method itself varies according to the needs and conditions of the institution or company concerned.

The following are three processes commonly used in the Know Your Customer (KYC) method:

1. Customer Identification

Before examining debtor identification documents, it is necessary to verify and examine all available information and check for inconsistencies in the information. Make sure that the prospective debtor is not included in the blacklist or sanctions list (such as the OFAC List or Interpol).

2. Customer Due Diligence (CDD)

CDD is a process in the form of identification, verification, and monitoring carried out by creditors to ensure transactions are in accordance with the profile, characteristics, and/or transaction patterns of Prospective Customers, Customers, or Walk-In Customers (WIC).

Banks or finance/leasing companies must carry out CDD procedures in the following situations:

  • Conducting business relations with prospective debtors;
  • Conducting business relations with walk in customers;
  • The bank or finance company doubts the veracity of the information provided by the prospective debtor, proxy, and/or beneficial owner; or
  • There are improper financial transactions related to money laundering and/or terrorism financing.

3. Enhanced Due Diligence (EDD)

When CDD may be deemed insufficient, the company must perform Enhanced Due Diligence (EDD) to gain a deeper understanding of who the company’s customers or potential debtors are.

High-risk customers or debtors are those with political exposure (PEP), positively identified on a watch list, terrorist list, transactions that deviate or do not match the customer transaction profile, correspondence accounts, and customers who are in high-risk locations. Ongoing surveillance measures typically include more intense monitoring of customer relationships and deeper investigative research.

From the explanation above, it can be seen that the credit verification process is important to check the correctness of the information and data provided by the prospective customer or debtor is true or in accordance with the facts and there are no errors or manipulations. The reason is that decision-making and agreements are heavily influenced by the process.





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