Why the DIY KYC Model Is Facing a Fraud Reality Check

⦿ Executive Snapshot

What: A report analyzes the impact of KYC/KYB ownership models on fraud risk and costs.
Who: PYMNTS Intelligence and Trulioo, based on a survey of 350 global firms.
Why it matters: Understanding KYC/KYB ownership helps firms mitigate fraud risks and optimize operational costs.

Firms using internal teams for identity verification reported a 78% loss rate after detecting KYA threats, compared to 44% for those using external providers.
Internal teams incur higher costs, averaging $26 per consumer KYC review and $51 per business KYB review, versus $11 and $20 for external teams.
Higher spending by internal teams does not correlate with better outcomes, as they also report more false positives and transaction declines.
External teams reportedly perform better on loss prevention and customer friction, but may limit expansion into new markets.
Hybrid models combining internal and external resources require careful oversight and performance benchmarks.

The report highlights the evolving landscape of digital identity verification amidst increasing automated threats in the KYC/KYB space.
It emphasizes the importance of balancing internal control with external expertise to effectively manage fraud risk and operational costs in a competitive market.

Companies may need to reconsider their KYC/KYB ownership models to improve fraud prevention and reduce operational costs.
The findings suggest a trend towards hybrid models, which may become increasingly popular as firms seek to optimize their identity verification processes.

Firms relying solely on internal teams face risks of fraud exposure and operational inefficiencies despite higher spending.
External providers may introduce limitations on market expansion, posing strategic challenges for firms looking to grow.

Future developments in KYC/KYB practices may depend on regulatory changes affecting identity verification processes.
Companies' ability to adapt their verification models effectively will signal their resilience against fraud and market competitiveness.