KYC for Fintechs

Fintechs have established themselves as the future of banking and finance in the digital economy. Offering customers a constantly-growing and impressive menu of new tools to manage their finances, fintechs are unfortunately also at the new frontlines of financial crime. This article explores how robust KYC systems can ensure fintechs stay compliant, grow their business and keep their customers safe in the brave new world of digital finance.

The financial technology (fintech) industry is seeing an explosion in growth, as consumers and businesses alike turn to digital solutions for banking, payments, investments, and other financial services. This innovative sector has completely disrupted the traditional financial landscape by revolutionizing how customers interact with their finances.

According to Market Data Forecast, the global fintech market is estimated to reach $346 billion by 2027, growing at a compound annual rate of over 25% over the next four years. This makes it one of the fastest-growing sectors in tech. 

Fintech companies are able to provide much more targeted products and services than traditional financial institutions, which helps customers keep better track of their finances. This is especially true for small businesses, who may not have access to the resources of larger organizations. Fintech also provides customers with a vast array of payment options, including mobile payments and cryptocurrency.

The rise in fintech has also opened up new job opportunities and increased access to capital. Fintech companies are constantly looking for talented developers, engineers, and designers to create innovative solutions that can help their customers better manage their finances. This is spurring a major value add-on for the technology industry at large.  

Additionally, venture capital firms have become more invested in the fintech industry as investors seek out lucrative opportunities in this booming sector. Fintech has also had a major impact on the banking industry. Banks are increasingly partnering with fintech companies to develop new products and services that can help customers save money, make better investments, and more easily manage their finances.

The fintech revolution has been a game-changer in the financial sector, providing easier access to capital and helping customers make better decisions with their finances. As the industry continues to grow, more opportunities will arise for consumers and businesses alike.

However, as with most disruptive technologies — in particular in the financial sector — fintech companies need to contend with new and evolving risks, especially when it comes to Anti-Money Laundering (AML) and Counter Terror Financing (CTF) challenges. 

As regulated financial businesses subject to strict AML/CTF laws, fintechs need to have robust and advanced approaches to AML in order to mitigate financial crime and ensure their compliance with local and international rules and regulations. 

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Know Your Customer (KYC): Overview

When it comes to AML/CTF in financial services, one of the key processes is called Know Your Customer (KYC). This process enables businesses in the financial sector to identify and verify their customers when they open an account. It helps protect organizations from fraud and money laundering as well as providing them with a better understanding of their customers’ identity.

KYC for fintechs usually involves collecting personal information from customers and verifying it against a reliable source, such as government databases or credit bureaus. This information is used to assess the customer’s risk profile and determine if they should be allowed to open an account with the organization. The data collected usually includes informations such as: 

  • Name 
  • Address
  • Date of birth
  • Marital status 
  • Employment history 
  • And other forms of identification

With the rise of the digital economy, KYC has become even more important. To begin with, it helps to protect businesses from fraudsters who may try to use stolen identities or false information to open accounts in someone else’s name. By verifying customer identities through KYC, businesses can ensure that their accounts are secure and that their customers are who they say they are.

KYC is pivotal for the fintech industry as it helps to protect both businesses and consumers from fraud and identity theft. This process ensures that financial services providers know exactly who they’re dealing with, helping them to minimize risk and protect their customers’ data. 

Fintech companies are also taking advantage of advanced technologies such as artificial intelligence and machine learning to streamline and automate the KYC process. These tools can help organizations quickly and accurately verify customer identities in order to reduce costs, minimize risk and ensure compliance with regulatory requirements. 

By implementing the right KYC processes, fintech companies can help to protect their customers while also ensuring that they are meeting all of their regulatory obligations. Automated KYC solutions allow fintechs to onboard large volumes of customers and scale rapidly into new markets — while remaining with global regulations, such as those developed by the Financial Action Task Force and implemented into national law codes such as the EU’s 6AMLD and the US’ Banking Secrecy Act, enforced by the Financial Crimes Enforcement Network (FinCEN)

The use of technology and automation in KYC processes is also helping to make identity verification faster, more secure and more cost-effective for financial services providers. This is helping to improve the customer experience and make it easier for businesses in the sector to provide a higher level of protection for their customers’ data.

KYC Challenges for Fintechs

The rise of fintechs has created an industry that is increasingly competitive, with companies faced with the challenge of providing secure and reliable services to their customers while maximizing the customer experience — and minimizing drop-out rates. 

1. Compliance

Robust compliance standards are an essential component to ensure safe and trustworthy operations — and regulatory agencies are becoming increasingly strict in enforcing rules governing the implementation of KYC and other AML practices. 

Implementing KYC effectively and compliantly can be complex for many fintechs and requires significant resources in both time and money. Fintechs must take into account the costs and resources associated with a KYC program in order to remain competitive and provide secure services for their customers.

2. Data Collection

In addition, collecting customer data from various sources such as mobile applications, websites, or other third-party providers can also be challenging. Fintechs must also be aware of the different regional and country-specific KYC requirements that they must adhere to in order for their services to remain compliant.

In addition, collected customer data must then be stored and processed securely and in accordance with privacy laws and protections such as the EU’s General Data Protection Regulation (GDPR)

3. Ongoing Monitoring

KYC data is only useful insofar as it is relevant and reflects reality. As customers’ risk profiles can change after they have been onboarded, it is essential for regulated businesses to periodically carry out ongoing monitoring of customer’s data, risk profiles and transactions ensure compliance with regulations.

Meeting the compliance challenge

Ultimately, it is essential for fintechs to have a comprehensive plan in place that will enable them to efficiently comply with local regulations while ensuring customer data safety and security. Fintechs must be proactive and take all necessary measures to ensure that they have a secure and effective KYC program in place for their customers.

By taking the time to understand the different challenges associated with implementing a KYC program, companies can better protect themselves from potential risks and provide safe and secure services to their customers. We have recently published the first part of an extensive guide on customer onboarding for compliance teams — you can read it here.

Fintechs can also take advantage of automated KYC solutions to streamline the process and reduce costs associated with compliance. By staying up-to-date on regulations through the use of third party KYC providers, fintechs can remain competitive in a changing industry while also providing secure services to their customers.


The key for any successful fintech is to ensure that they have a robust KYC program in place that will help them remain compliant while also providing secure services to their customers. By understanding the challenges associated with implementing a KYC program, fintechs can be better prepared for the future and ensure that they are providing reliable and safe services.

By utilizing automated solutions and staying up-to-date on the latest regulations, fintechs can further streamline their operations while also ensuring compliance and protecting customer data integrity. In doing so, fintechs can provide a secure environment for their customers to do business, thereby increasing trust and loyalty among their users — while ensuring a sustainable and compliant path to their own growth. 

Are you looking for an Automated KYC provider to help your fintech scale securely and efficiently? Get in touch and we’ll be happy to arrange a demo of how KYC-Chain can make it happen.