Perpetual KYC and Emerging Solutions

 KYC (know your customer) is an essential process in the world of financial institutions and apps. It plays a pivotal role in preventing financial crimes like money laundering, fraud, and identity theft, often falling under the umbrella term "anti-money laundering" (AML). KYC focuses on verifying and documenting customer identities during onboarding, assessing risks, and making crucial business decisions.

 The onboarding process typically starts with collecting and verifying customer information, including name, date of birth, address, and identification documents. Depending on the complexity of the provider and the applicant, KYC procedures can vary, with enhanced due diligence (EDD) designed to capture contextual data before risk assessment.

 Despite its importance, KYC processes have long been criticized for being time-consuming. Traditional banks, on average, take 24 days to onboard customers, while modern apps are more efficient, taking an average of six minutes, 29 clicks, and 16 fields to complete the process. These challenges are reflected in statistics, with account creation abandonment rates of 40%-60% and 89% of users reporting unsatisfactory KYC experiences, leading 13% to switch financial institutions.

 One of the significant challenges is the need for perpetual KYC, an approach to continuously verify and update customer records throughout the entire relationship. Keeping customer data up-to-date is essential to comply with regulations, manage risk, and improve customer service. Traditional methods for data maintenance are costly, error-prone, and often performed on a one-, three-, or five-year cycle, leading to the accumulation of stale data, which can result in latent and acute risks.

 Balancing compliance effectiveness with customer experience is a top challenge, especially for traditional financial institutions racing to keep up with digitally advanced competitors. In a rapidly evolving financial landscape, the identity verification process must adapt to meet the growing need for speed, accuracy, and security.

 Fortunately, new solutions are emerging, including a class of APIs that enable consumers to share updates with multiple accounts simultaneously, stemming from a single verifiable identity. This approach offers a more efficient and customer-friendly way of validating identity updates, reducing the need for repetitive verifications across multiple accounts. It also leads to improved customer experiences, which can translate into a 15% increase in revenue.

 As user-permissioned data, identity, and trust in digital finance continue to evolve, the financial industry can anticipate a focus on consumer privacy and data portability. The path forward is still uncertain, but one thing is clear: users will have more control and influence in managing their data and identities in the digital finance landscape.