FinTech Glossary

Meaning

Know Your Transaction (KYT) is the process of monitoring and analysing transactions to detect unusual, suspicious, fraudulent, or non-compliant activity. If KYC and KYB explain who the customer or business is, KYT explains whether their actual transaction behaviour makes sense.

KYT is not limited to checking one transaction in isolation. It looks at patterns, frequency, amounts, counterparties, geography, merchant categories, device signals, and behavioural changes to identify risk.

How KYT Works

KYT systems usually combine rules, risk scores, alerts, and investigations.

Typical monitoring checks include:

• Sudden spike in transaction value or volume

• Transactions inconsistent with the customer's stated business model

• Repeated payments just below reporting or approval thresholds

• High-risk counterparties, geographies, or merchant categories

• Round-tripping, layering, or unusual fund movement patterns

• Rapid cash-out, refund abuse, chargeback spikes, or mule-account indicators

• Transactions involving sanctioned or prohibited entities where screening applies

The goal is not to block every unusual transaction. The goal is to identify activity that needs review, escalation, additional due diligence, or suspicious transaction reporting where legally required.

Business Context

KYT is highly relevant for banks, NBFCs, payment aggregators, fintech platforms, marketplaces, remittance businesses, crypto platforms, corporate card issuers, and any company handling large transaction flows.

For Indian businesses, KYT becomes important because financial crime risk does not end at onboarding. A merchant may pass KYB checks at the start, but later show suspicious behaviour, such as unusual refund patterns, fake transactions, high chargebacks, or settlement routing that does not match the declared business model.

This makes KYT a continuing control, not a one-time compliance activity.

Why It Matters for Businesses

KYT helps businesses move from reactive fraud handling to proactive risk detection. It also helps compliance teams show that transaction activity is being monitored in line with risk-based AML and fraud-control expectations.

Business benefits include:

• Earlier detection of suspicious activity

• Better fraud and chargeback prevention

• Stronger merchant and customer risk scoring

• Cleaner audit and investigation trails

• Lower regulatory and reputational exposure

• Better decisions on limits, holds, settlements, and enhanced due diligence