Know Your Customer (KYC) – The Importance of Collecting Complete Customer Identification Information for Debt Collection


As a business, there are a variety of reasons why customer debts may go uncollectible. The top three reasons we have found why debts go uncollected in Cayman are:

  1. Poor collection of customer information by businesses
  2. Many customers are genuinely unable to pay at the time
  3. Some customers show an outright unwillingness to pay their debts and who ultimately game the system

Today, we’ll focus on the first reason. How can you improve the quality of your customer data collection? We will explain what constitutes low quality data, share the various financial risks that low quality data pose on businesses, explore the benefits of high quality customer data, and establish best practices with specific customer data quality controls including appointing a Customer Data Champion. Let’s begin!


Low Quality Customer Data

What exactly is low quality customer data in the first place? Low quality customer data is any data that does not properly and positively identify the customers to who they are. Think about the following scenario. If a customer writes the creditor an email or calls the creditor on the phone to provide their information informally, the creditor likely will set up the customers account based on that informal information. Chances are that this informal information will not match the actual legal name of the customer. 

For example, if the customer identifies himself as Jim Smith, did the creditor set the customer up as Jim Smith?  If yes, then chances are that is the wrong legal name of the person because Jim is usually a short name for James. Furthermore, chances are there are many other James (Jim) Smiths in the country. How do you know which Jim Smith is the right Jim Smith?  

For small businesses, this might seem unimportant because they probably know and see the customer regularly. What if the creditor’s business grows? Now there are more employees who may not know the debtor by face. What happens then?  What happens if the debt goes bad and a third party collection agent needs to get involved? Will the inaccurate information provided to the employees or third party collection agents be enough to help them find and collect on the debt? 

The answer is, probably not.  Bad customer data is compounded by poor attention to detail in the information flowing through to all other contact information as well.


Financial Risks of Low-Quality Customer Data on Businesses

The financial risks of maintaining low quality customer data is simple. There’s a good chance that accounts will go uncollected first due to poor customer contact information. Later, this feeds into the debt collection cycle, where debtors ultimately get lost. If the matter is taken to court, inaccurate identifying information increases the risk the debtor may dispute the debt on the basis it is not them. In some cases, the process server is simply unable to find the debtor to serve legal documents on them.

In either case, the debt will be lost and the available operating funds of the business will be reduced. As you know, this can affect meeting employee payrolls or paying monthly business obligations. In turn, shareholder return on investment could go negative and the going concern of the business could become an issue. 

On the other hand, it could be that the customer was simply unhappy with the creditor’s products or services and decided simply not to pay for the service, without telling the business why they did not pay the bill. This lack of feedback means that the business is losing a good customer and any past, present or future customer referrals that the customer may make.

Low quality customer data also means that the creditor may fall foul of the Cayman Islands Data Protection Laws. They may be held liable for wrong person data breaches where they fail to rectify their records in a timely manner.

Simply put: Bad Customer Data = Increased Probability of Bad Debt


Benefits of High Quality Customer Data

Maintaining high quality customer data yields several financial rewards. First, a business will be able to build high engagement and better customer relationships with better contact information which could translate into greater opportunities to increase customer service offerings and sales. This results in better business and faster collections. 

In the case where a debtor stops paying on their account, then it’s time to turn to the high quality customer data to contact them and uncover why the debtor stopped paying. The creditor might find out that the reason the customer didn’t pay and stopped communicating was because they were unhappy with the service or products of the business. In such cases, it may be time for the business to find ways to make the customer happy and fix the relationship. It may also be time to review the products and services offered to ensure that they are delivering value and remaining relevant for your customers.

High quality customer data also means the creditor stays within the bounds of the Cayman Islands Data Protection Laws and all parties are properly protected against wrong person identification.


Customer Data Quality Controls

To ensure data quality, it is best to have a written credit policy in place (see free executive summary credit policy here) which addresses the onboarding of new business. Most important, it should include a written customer application form (see free example form here).

The credit application form should contain all the identifying customer information that is needed to positively identify the customer. The customer should also be required to provide at least one form of a government-issued picture identification document such as a passport, drivers license or voter’s identification card. The creditor should verify customer data against the valid government-issued identifying document.

In future articles, we will deep dive into all of the steps for establishing a detailed credit policy. Stay tuned!


Appoint a Customer Data Champion

Once the business is committed to implementing the best practice of collecting and maintaining high quality customer data, especially through putting the proper written policies and procedures in place, it is important to appoint at least one person to be the Customer Data Champion. 

This person will serve to be the overseer of the Customer Data control environment. Their job is to ensure that customer data is continually maintained in line with the policies and procedures of the creditor. They will also make system modifications from time to time as necessary to ensure that the best systems and methods are always employed. Should issues arise, such as customer conflicts or complaints, the Customer Data Champion can step in and resolve matters to the satisfaction of all involved.



Tying it all together, we conclude by looking at a comparison of bad customer data versus good customer data. We’ll also offer explanations of the “why’s” involved, along with a summary of the outcomes of both types of data.

Customer Data Criteria

Bad Customer Data

Good Customer Data

First Name Jim James Short names are not legal names
Middle Name Philip Getting middle names helps to positively identify the creditor’s debtor and not just any consumer who is not the debtor
Last Name Smith Smyth Ensure proper spelling of the legal name is captured
Date of birth 80/8/6 Aug 6, 1980 The date of birth should be a mandatory field and the format should be carefully managed to ensure the date is entered consistently to avoid bad data capture caused by reversed dates or worse, no date of birth at all
Government Issue ID Type and Number CI Drivers License #1234 Getting a government issued picture ID helps to positively identify the creditor’s debtor and not just any consumer who is not the debtor, ensure that legible color copies of the ID’s are taken in case the picture  or information needs to be referred back to
Physical Address 123 Washington Street

George Town

Grand Cayman

Failing to collect the physical home address of the person means one less place to look for the debtor and another loss of ability to identify the correct debtor
Mailing Address Box 1016 P.O. Box 1016
District GT George Town
Post Code KY1234 KY1-1234 Incorrect postal code number
Country Cayman Cayman Islands
Phone 1 949-1111 949-1111
Phone 2 326-1010 The more numbers the better if available, and mobile numbers are even better because chances are the phone will be on the person nearly 24/7
Phone 3 917-2222 The more numbers the better if available, and mobile numbers are even better because chances are the phone will be on the person nearly 24/7
Email Work jim@work jim@work.com
Email Personal jim@gmail.com Best to get at least one personal email address.  Work emails are good, but if the person leaves the job, then the work email will probably be terminated and therefore the personal email address should continue to be a way to communicate with the debtor
Email Personal jim@hotmail.com Personal emails are particularly important if the debtors have left the island and all other forms of communications are no longer in use, most times this is the only remaining means of communicating with debtors after they have left the island
Social media address Facebook.com/jim If available, it’s a good idea to capture this information.  Provide pictures of the debtor that help to positively identify the debtor, instant messenger can be a last remaining means to communicate with the debtor if they left the island
Next of Kin/Close Contact Name Tim Johnson This person provides a back-up person to  contact in case the customer become unresponsive and the person no longer works at their listed employer
NoK or CC Mailing Address P.O. Box 845, KY1-1100
NoK or CC Physical Address 456 Rose Road, GT GCM
NoK/CC Phone 943-8888
NoK/CC Email tim@yahoo.com
Employer Name XYZ Services Ltd. The employer provides a back-up contact in case the customer become unresponsive
Employer Phone 949-7777
Employer Email info@xyz.com
Employer Website www.xyz.com

This could be anybody.  Bad Data means the customer could become a ghost and leave bad debt behind.

This debtor is confirmed to be who they say they are and ready to build a successful long lasting relationship with this customer.


Moral of the story is

Good Customer Data = Good Customer Business


We trust you have found this article useful to your business and urge you to put some of this information into practice today.  If you would like to learn more about CINCB, or become a member to get help with collecting debts, or getting credit reports on your customers as a part of your overall credit risk program, please visit us at www.CINCB.ky

We also offer personalized debt collection training for businesses. Email us at info@CINCB.ky today to find out more.k

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