Traditional Know Your Business (KYB) data providers often face significant challenges when dealing with small business data. These small businesses often have diverse structures, limited public profiles, and changes in growth and development. Such challenges can hinder conventional B2B data collection, maintenance, and utilization methods.
For banks, lenders, insurance providers, retailers, and other companies who need to run thorough KYB checks on their small business customers, this B2B data gap makes it difficult to source accurate information to validate customer legitimacy. Many companies routinely cannot verify between 20-40% of small business customers using their existing data sources.
There are a variety of reasons why small business data poses so many challenges to traditional B2B data collection methods. In this article, we’ll explore some of the challenges and discuss how they impact small business KYB verification. We’ll also show how KYB data solutions like those from Markaaz can help companies overcome the bottom-line impact of these small business data challenges.
Common SMB data challenges KYB data providers face
The process of business identity verification is a critical step to onboarding customers, identifying new revenue opportunities, and reducing potential fraud and compliance risks. KYB data providers need to provide accurate, comprehensive B2B data so companies can validate customer information and legitimacy.
However, traditional KYB data providers often find themselves grappling with the unique challenges presented by small business data. Here are a few:
Sparse data availability
Small businesses often have a limited online presence and digital footprints, posing a challenge for traditional KYB data providers. Unlike larger companies, small businesses may not have a robust online profile, making it difficult for providers to extract relevant and comprehensive information.
Diverse business structures
Small businesses come in myriad forms – sole proprietorships, partnerships, LLCs, or corporations. Traditional KYB data providers, designed with a focus on standardized information, struggle to adapt to the diverse business structures inherent in the small business ecosystem. This diversity complicates the verification process, increasing the likelihood of false positives or negatives.
Dynamic nature of small businesses
Small businesses are inherently agile and dynamic. They may undergo rapid changes in ownership, management, or even locations. Traditional KYB data providers, often relying on static databases, find it challenging to keep pace with these frequent alterations. This lag in updating information introduces data discrepancies may prevent a return result in a business verification check.
Outdated or incorrect SMB information hinders a company’s ability to validate a business customer. Even a minor misspelling error can stall the data verification process, prompting onboarding professionals to either perform time-consuming, resource-intensive manual checks or reject a potential customer outright.
SMB information is often fragmented across various sources, making compiling complete and accurate details about SMBs frustrating and complicated. SMBs may register at local or regional levels, and this information may not be aggregated into a centralized database.
Language processing issues in global data coverage
In a global context, language processing challenges—i.e., translating across sources—can affect the accuracy and relevance of SMB data. Processing data across languages requires sophisticated language understanding and interpretation capabilities. Adapting to linguistic nuances is crucial for effective KYB data provision on a global scale.
Limited diverse data
The absence of diverse data limits companies’ depth of understanding about SMBs. Non-traditional sources of information can offer additional insights into SMBs’ business activities, overall risk profiles, and creditworthiness. This can include social media platforms and online reviews and ratings.
Social media activity can offer insights into an SMB’s customer interactions and online reputation, while reviews on platforms like Yelp or Google provide a window into an SMB’s service quality, customer satisfaction ratings, and even potential issues. If an SMB doesn’t have a web presence, this data will not be available for KYB data providers.
The business impact of SMB data
Understanding potential challenges is the first step to overcoming the intricacies of SMB data verification. The next is knowing what could happen if these challenges remain unresolved.
Here’s how SMB data challenges could impact your bottom line:
If your KYB process does not provide the information you need to correctly assess small business customers, you increase exposure to fraud, regulatory penalties, and legal challenges. To safeguard the integrity and resiliency of your company, it’s necessary to address the limitations posed by traditional SMB data verification. Otherwise, these risks could lead to financial loss, reputational damage, and other penalties that affect your organization’s stability and standing within your industry.
Missed business opportunities
The inability to verify the legitimacy of a potential SMB partner or client hinders collaboration and may lead to companies taking an unnecessarily conservative approach to forging new relationships. In a fast-moving business environment where swift and informed decisions are paramount, failure to assess the legitimacy of business partners promptly and accurately can hinder growth and expansion.
Costly manual processes
Without a consolidated, reliable SMB data source, verifying SMB data often involves labor-intensive manual processes. Inevitably, this means increased costs and potential inefficiencies due to human error. And if large volumes of data have to undergo manual verification, you lose out on potentially lucrative business opportunities and risk alienating your customers.
Can technology provide a solution?
While verifying the accuracy of SMB data remains a complex process, technology innovations can improve KYB solutions to address some of the data challenges that make small business identity verification so difficult.
Examples of how technology can close small business data gaps:
Consolidate global data sources
Traditional KYB data providers often rely on individual, localized databases, limiting their ability to comprehensively verify small businesses with a global footprint. The right data and language processing technology can aggregate data across a vast array of global sources. By tapping into international databases, regulatory filings, and authoritative sources worldwide, technology-driven KYB solutions ensure a more holistic and accurate representation of small businesses operating on a global scale.
Matching algorithms for data accuracy
Small businesses face challenges related to data entry errors, spelling issues, and outdated records, which can compromise the accuracy of business identity verification. Sophisticated matching algorithms that go beyond basic string matching can intelligently account for variations in data entry, controlling for spelling errors and cross-referencing information across multiple sources to ensure the most accurate and up-to-date records. This not only enhances the precision of KYB verification but also minimizes the risk of false positives or negatives.
Daily updated compliance data
The dynamic nature of small businesses demands a real-time approach to data updates, especially in the context of sanctions screening and Anti-Money Laundering (AML) compliance checks. KYB solutions can provide daily data feeds to continuously monitor changes in relevant data points. This ensures that companies relying on KYB data are promptly alerted to any developments that may impact their risk exposure, allowing for timely and effective risk mitigation strategies.
A comprehensive understanding of a small business goes beyond basic details and necessitates robust firmographics. Technology facilitates the aggregation and analysis of diverse data points, including global entities and officers associated with a business. By tapping into global business registries, legal databases, and authoritative sources, KYB solutions provide a detailed and accurate profile of a small business, encompassing its structure, ownership, and affiliations on a global scale. This depth of information enhances the efficacy of KYB processes and aids in making well-informed business decisions.
How Markaaz can help
Markaaz provides a practical solution to the challenges traditional KYB data providers encounter in small business verification. Leveraging 65,000 global data sources and proprietary data matching algorithms, Markaaz has created a database of 300 million small business records spanning 200 countries. This technology-driven innovation not only enhances data accuracy but also provides real-time business identity verification that delivers a 25% better match rate. These KYB solutions offer a practical way for companies to fill gaps in their small business verification, fostering better verification processes, risk management, and compliance.
Connect with our team to explore more about how Markaaz’s small business KYB data can help you approve more SMB customers.