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The perfect storm: why KYC is critical right now

A perfect storm is on its way and the importance of customer identification will be critical moving forward.

A new study by Juniper research has revealed that spending on Regulatory Technology (Regtech), systems that enable banks and other heavily regulated sectors to meet their compliance burdens, will globally exceed $130 billion in 2025, from $33 billion in 2020.  

The report found that this 290 per cent growth is being fuelled by greater use of AI to automate highly manual tasks and the transition to digital onboarding and open banking, which have emerged as critical capabilities in the wake of the pandemic.  

It is expected that nearly 330 million new bank accounts will be opened via digital onboarding in 2025, from 184 million in 2020. The UK is widely considered a leader in digital onboarding and it was this week announced that the UK Competition and MArkets Authority (CMA) is looking to pave the way for the next phase of open banking in the market. It has now launched a public consultation to explore the opportunity to establish an independent, non-profit entity to accelerate development and adoption of open banking apps. The key here is that Open banking isn’t just for banks. A case-in-point is accounting platform Freshbooks recent partnership announcement with open banking technology firm Salt Edge to unlock its small businesses’ bank and other financial data via open banking. Salt Edge will provide its bank data aggregation service, allowing FreshBooks to automatically manage finances by linking their EU bank and credit accounts to the portal. What is clear is that digital onboarding and open banking in the UK are growing apace. 

However, add to this the fact that identity fraud is on the rise and the importance of KYC becomes significant. Close to 80 per cent of organisations surveyed by the Association of Certified Fraud Examiners said they’d seen an increase in levels of fraud since the start of the Covid-19 pandemic. When we all started working from home the fraudsters did as well! Scammers have taken advantage of the Covid-19 chaos to create more fake online accounts than ever before using the stolen data of people both alive and deceased.   

The growing demand for digital onboarding and open banking creates the perfect storm for fraudsters, so it is critical that organisations really get to grips with KYC in order to ensure that people are who they say they are.  

For information about how Halo, our deceased identity fraud product, feeds into KYC please get in touch.