Dreams of Opening an Account Shattered: Why is KYC so Difficult?
Awei stared at the notification on his phone screen: “Verification Failed, Please Resubmit Information.” This was the fourth time he had received the same message. In order to catch the Bitcoin express train, he decided to apply for an account with a cryptocurrency exchange. However, the seemingly simple KYC process had turned into a time-consuming and laborious nightmare.
Following the requirements, Awei took a photo of his ID card, but it was rejected due to glare. He changed angles and lighting, and it took him three attempts to pass. Next, he had to write a designated text by hand in a photo. He made sure his handwriting was neat and legible, but the system indicated that the handwriting was blurry. He tried again with a thicker pen, but still failed.
The last step was taking a selfie. Awei struggled to find the brightest spot indoors, but was prompted with “image clarity insufficient.” Determined, he even ran to the balcony, but the strong sunlight caused overexposure. He gritted his teeth and retried five times, wasting an entire afternoon, but still received the message “verification not passed.”
In fact, such situations are not uncommon in traditional identity verification processes. For many users who want to enter the Web3 world, the KYC (Know Your Customer) process is like a door that keeps closing.
The complexity and inefficiency of identity verification have made the once anticipated account opening journey frustrating, reflecting the pain points of the previous KYC process.
Li Jiguang and Xu Naihe, with a background in white-hat hacking, originally planned to start a cryptocurrency exchange. However, during their research, they discovered that the necessary identity verification process for exchanges was a major pain point for both businesses and users.
The identity verification process is not only complex and low in account security, but also time-consuming and labor-intensive, resulting in a poor user experience. Therefore, many users choose to leave due to the “inconvenience” before they can even start using the service. Li Jiguang and Xu Naihe founded the KYC company Authme in 2019, determined to reshape the KYC process to make identity verification faster, safer, and more intelligent.
What is KYC? Why is KYC important?
KYC (Know Your Customer) is an identity verification process that requires users to upload identification cards, passports, driver’s licenses, and other documents, as well as personal photos or even videos, to confirm the customer’s true identity and prevent fraud, money laundering, and other criminal activities.
Verifying the legitimacy of user identities can help businesses timely identify and block suspicious fund flows, in compliance with anti-money laundering (AML) regulations. Additionally, through KYC identity verification, the occurrence of identity theft, fraud, and other fraudulent activities can be reduced, protecting the funds and data security of both businesses and users.
“The most important thing for banks or insurance companies is property loss,” added Li Jiguang, CEO of Authme. “If a user’s identity is counterfeited, it may not only result in financial losses, but also affect their personal credit. Not to mention the insurance industry, which may face the moral risk of ‘endangering lives for insurance money.'”
In addition to highly regulated industries such as financial services and virtual currency operators, electronic payment, online e-commerce, car rental, and dating platform operators have also begun to have a need for online identity verification. For example, car rental companies must verify that users have driving qualifications, and dating apps, in order to solve the problem of rampant fraud, are gradually realizing the importance of identity verification.
Deepfake Faces Everywhere! How to Deal with KYC?
In recent years, fraud techniques have been constantly evolving, especially with the rise of deepfake technology, which has made identity verification even more challenging.
Earlier this year, a user of an international cryptocurrency exchange lost $2 million due to deepfake technology, shocking the industry. Hackers hacked into the user’s mailbox using leaked personal information, reset the password, and used AI and deepfake to create forged documents and fake faces, successfully passing the exchange’s KYC review. They even successfully applied to change the user’s phone number, email, and Google authenticator, resulting in a significant loss of assets.
These incidents show that traditional KYC systems are caught in a dilemma between ensuring security and improving user experience: overly strict verification processes make users hesitant, but technical loopholes expose businesses to significant risks.
Faced with increasingly sophisticated fraud methods such as forged documents and deepfake-generated fake faces, the KYC process must also undergo technological upgrades and engage in an “arms race” with fraudsters. Multiple technologies, including image analysis, device security checks, and government database comparisons, have now become standard equipment.
To address all these issues, Authme uses its self-developed AI identity verification, OCR document recognition, NFC chip document verification, and facial recognition technologies to minimize the possibility of fraud and identity theft.
Li Jiguang pointed out that in addition to comparing data in government databases, the KYC verification process also analyzes subtle biological features such as photo lighting texture, facial depth, skin texture, and microvascular flow to prevent forged identities and Deepfake attacks.
“When faced with such techniques, we analyze whether the skin texture of the face is normal, whether the light behind the face is the same, or whether it is actually a mask, etc. We use AI technology to assist in the analysis and confirm that it is indeed the person themselves.”
Furthermore, Authme’s facial comparison technology can quickly confirm whether users and their ID card photos are the same person. Even with weight loss or changes from junior high school period photos, AI technology can assist in identification with a recognition rate of up to 99.7%.
Application Rejected Again and Again! The Biggest Pain Points for KYC Service Providers and Users
For financial services, car rental platforms, and even dating apps, the value of KYC is no longer just compliance with regulations; it is also crucial for building user trust and satisfaction.
However, the challenges of identity verification go beyond security; optimizing user experience is equally important.
“Many times, users want to open an account because they have an immediate need,” Li Jiguang said. “Whether it’s opening a trading account or renting a motorcycle, if the KYC review takes 2 days and requires repeated applications 3-4 times, users may never use it again.”
The more cumbersome the process, the more likely potential users are to choose to give up and leave. Only when verification becomes fast, intelligent, and secure can KYC truly unleash its potential.
Traditional KYC processes rely heavily on manual review, which is not only time-consuming and labor-intensive, but also subject to different review standards, creating security vulnerabilities.
In order to comply with regulations, businesses often have to spend a lot of costs, and users have to go through the painful “application loop,” making both parties miserable.
With the help of AI technology, users only need to upload identification photos on their mobile phones and take a simple dynamic selfie, and the system can quickly identify their identity. The entire process can be completed within 3 minutes.
Now, everything can finally be as users expect, easily completing verification and entering the Web3 world without experiencing a “application adventure.”
Currently, Authme supports identification documents from over 190 countries and a wider range of application scenarios, including financial services, electronic payments, e-commerce, and social media. They plan to further optimize digital identity verification services, including strengthening cloud security deployment and deploying quantum encryption foundations to prevent interception of communication processes and ensure data privacy and system integrity.
