55% of crypto companies plan to increase identity verification budget, Sumsub research finds
Sumsub, a tech company that offers an all-in-one technical and legal toolkit to cover KYC, KYB and AML needs, has released the first-ever identity verification report for the crypto industry.
LONDON , June 29, 2022 /PRNewswire/ -- Sumsub, a global identity verification software provider, today published State of Identity Verification in the Crypto Industry. This is the first-ever study of verification practices among crypto businesses, combining remote verification statistics coupled with expert insights into regulatory compliance and the future of identity verification.
For this study, Sumsub surveyed 200 crypto companies and analyzed millions of identity verification checks performed in 2021-2022. The data will help businesses understand industry verification standards and level up their user experience.
In addition to its data-driven insights, the report also includes interviews with legal experts certified by ICA, CySec, and ACAMS, as well as crypto and fraud professionals from Sumsub, Mercuryo, and Notabene.
The data shows that almost 80% of crypto businesses use automated KYC solutions.
What kind of users are getting verified on crypto platforms? According to Sumsub's analytics, 80% of them are men (although the gender ratio varies across countries) with an average age of 30 years old. This audience is getting younger, since the average age was 33 in 2021. The three most popular languages among crypto users are English, Portuguese and Spanish.
Сrypto businesses are required to perform identity verification by law. So, it's no surprise that, for 55% of the surveyed companies, staying compliant with AML regulations is their main verification goal.
26% of businesses indicated building trust in users and partners as a key goal in using identity verification solutions, while just 17% of those surveyed indicated fraud protection as a primary goal.
The report also takes stock of the crypto company verification budgets. 55% of businesses spend between $1,000–$10,000, over 20% of companies spend from $10,000 to $100,000, and 6% spend over $100,000 monthly. The remaining 18% spend less than $1000 a month. Notably, more than a half of respondents (55%) plan to increase their budget for verification.
The findings indicate that 47% of crypto businesses employing automated verification feel they have strong fraud detection; just 31% of those who manually check their users feel the same way. Accordingly, 15% of businesses using manual verification feel they have low fraud protection, while just 4% of automated solutions adopters feel the same.
In the first quarter of 2021, the most commonly forged documents were from Kenya, Cameroon and Iraq. In Q1 2022, the majority of forgery attempts were on ID cards and driver's licenses issued in Vietnam, Bangladesh, and Pakistan. The USA and Canada were also among the top ten countries in terms of forgery attempts.
Crypto companies face different challenges depending on whether they use automated or manual verification solutions. The challenges with automated solutions are false applicant rejections and approval rates—whereas, for manual solutions, it's long verification time, human error, and difficulty entering new markets.
Working in a constantly shifting regulatory landscape is another big challenge. That's why crypto businesses need to start building their compliance infrastructure ahead of time, taking into account possible regulatory changes in the near future. In the report, Sumsub's experts offer actionable solutions for staying ahead of the game in the world of crypto.
Fraud prevention remains a key challenge for the industry. Sumsub's anti-fraud team noticed a growing number of fraudsters using deepfakes and 3D projections to bypass verification, due to increasingly sophisticated—and available—fraud tools. Thankfully, AI-based facial biometric solutions such as liveness and face match can fight back against these attacks.
The study examines practical ways to balance AML compliance and user pass rates.The first and most evident step is to automate verification. This allows businesses to achieve an average verification time of 50 seconds, spending 70% less time on compliance tasks while reducing costs by 40%.
Other measures might include tailoring verification flows to different customer segments based on their risk profiles and splitting the onboarding process into several steps, or "levels". When applied properly, level-based identity verification significantly reduces drop-offs during onboarding and ensures strong fraud protection.
Almost 80% of respondents plan to enter new markets or acquire new licenses within the next 12 months. This underscores demand for effective user verification and AML compliance.
"Building AML compliance requires significant effort", – explains Peter Sever, Co-founder and Chief Strategy Officer of Sumsub. – "Even if a business outsources to a KYC solution, it must still construct baseline AML infrastructure. This includes implementing an AML compliance program, hiring a money laundering reporting officer, and so on. Start preparing in advance for future changes so you have the time to get compliant before new rules—and penalties—kick in".
The report also includes expert takes on the regulatory and verification-related changes awaiting us in the future, including tougher registration and licensing requirements for crypto providers, broader Travel Rule implementation, stricter requirements for KYC systems, and more. Incoming trends are also discussed, such as introduction of the Self-sovereign identity (SSI) and "soulbound" tokens (SBTs), KYC practices in expanding metaverses, as well as the development of verification solutions for holders of private wallets on DeFi platforms.
The report is available for download at this link: https://sumsub.com/crypto-report/
Press materials:
https://drive.google.com/file/d/1YItYm11PfQve-v1zatETOIZINkuATR73/view?usp=sharing
Sumsub is an international tech company that helps businesses onboard online clients and comply with AML/KYC/KYB regulations with AI-driven identity verification tools. It uses forensic anti-fraud software to make identity verification fast, secure, and transparent for clients.
Sumsub's business model is based on adjusting verification & identification services to global compliance requirements. Thanks to a strong in-house compliance team, Sumsub has grown into a leader within this sector, helping businesses comply with regulations in 220+ countries and territories. The company's methodology follows FATF recommendations—the international standard for AML/CTF rules. Sumsub is licensed as ASP by CySec.
Sumsub offers an all-in-one, customizable solution that verifies users no matter their language or location—helping businesses scale to international markets faster and adhere to global compliance requirements more efficiently. The platform is easily adjustable and offers a wide range of solutions, from fully-automated identity verification to agent-assisted verification.
Sumsub helps companies implement a risk-based approach and follow both global and local regulatory requirements (FATF, FINMA, FCA, CySEC, MAS). All data is kept on Amazon servers in the EU.
SOURCE Sumsub
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