Key Insights from SEON's Webinar: The Evolution and Future of KYC in Banking

I was recently invited by SEON to join a webinar on KYC, and since it's such a hot topic for the banking world, I thought I’d share my thoughts with you! I’ll admit, I was a little nervous—after all, I’m more of a theoretician than someone on the front lines. But luckily, my amazing colleagues, Costin Mincovici from tbi Bank and Jack Buckley from Curve, who are out there in the trenches, brought some seriously valuable insights to the table.

Here’s a quick rundown of what we covered:

• How the KYC process has evolved over the past decade
• The key challenges banks and PSPs face in balancing UX, compliance, and security during digital onboarding
• Effective strategies to tackle these challenges, including fraud prevention and compliance priorities for the C-suite
• Trends to watch for in 2025 and potential disruptions in the KYC process

It was a great discussion, and I’m excited to see where KYC will go next!

From Paperwork to AI: How KYC Processes Have Transformed in the Digital Age

When you hear ‘KYC’, what comes to mind? For me, it’s trust, official documents, compliance, digital innovation, biometrics, real-time monitoring, fraud prevention, protection, building a long-term relationship with the bank, and memories of opening my first bank account.

The KYC journey has evolved tremendously. Back in the day, opening a bank account meant bringing a stack of paper documents (IDs, utility bills, etc.) to a branch, waiting in line or booking an appointment. A bank assistant would fill out forms, scan your documents, and send them to the headquarters for review. For personal accounts, the process could take days; for businesses, even longer.

Banks assessed customers and assigned risk scores based on financial activity. Reviews typically happened every five years, leaving gaps where accounts might be misused, like for money mulling. Red flags were often ignored due to limited technology or a lack of interest in low-risk profiles.

Then COVID-19 transformed everything. Physical bank branches became optional. Customers could open accounts with a selfie or live video, upload their ID via photo, and have their accounts activated almost instantly.

Banks began leveraging advanced technologies like AI/ML, graph analytics, NLP, and biometrics (behavioural and voice recognition) to evaluate users. These tools analyse data such as geolocation and email patterns, improving KYC speed, accuracy, and efficiency. Signicat’s Battle to Onboard report highlights this shift. In 2022, they found that 68% of consumers abandoned applications with poor digital onboarding experiences. Gen Z, especially in Europe, is impatient with lengthy, complex processes.

Today, seamless digital onboarding is non-negotiable. Young consumers want a fun, simple, instant experience. When onboarding is smooth, they associate the same excellence with your product or service. Conversely, friction during onboarding—slow, complex, or unintuitive processes—creates a ‘digital halo effect’, where dissatisfaction with onboarding extends to the product itself.

In short, digital onboarding isn’t just a tactical necessity—it’s a strategic priority for creating exceptional customer experiences.

Challenges of Digital Onboarding: Trust, Fraud, Compliance, and Cost Considerations

High digitalisation is a double-edged sword. While it has improved the digital onboarding process—boosting speed, reducing costs, enhancing customer satisfaction, and allowing banks to access new products, services, and customer segments, which drive revenue—it also brings significant challenges.

These challenges range from building trust and accurately identifying customers during onboarding to the fact that bad actors can exploit these new technologies for fraud. There are also increased costs tied to adopting new technologies, replacing legacy systems, staying compliant, or, worse, paying fines, which can lead to reputational damage.

Another challenge lies in shifting company cultures. With faster digital onboarding (minutes instead of days or weeks), compliance and fraud teams should be seen as drivers of business growth – helping create exceptional products, not just cost centers.

Fraud is not just a department issue—it’s a team effort. When fraud, cybersecurity, and compliance teams collaborate, solutions often come more easily.

Overcoming Key Challenges in Digital Onboarding, Data Management, and Fraud Prevention

One of the biggest challenges in today’s digital landscape is the explosion of user activity, which has led to an overwhelming amount of data. On average, each user has over 100 online accounts, making data management more complex. To make informed decisions, this data needs to be cleaned and processed properly. Since AI and data science heavily rely on human input and accurate coding, the old saying ‘garbage in, garbage out’ holds true—poor input leads to poor results.

Additionally, this data must be updated in real-time, especially for tasks like transaction monitoring and sanctions screening. For example, after the war in Ukraine began, many Russian entities were banned from the global financial system, requiring rapid updates to databases with new sanctions, including names of oligarchs and companies.

Fraudsters also use technology—like AI-powered deepfake videos—to bypass onboarding detection tests or tools like Doc Juicer to forge documents. This is just one of many fraud types, including account opening fraud, synthetic IDs, and identity theft, all designed to bypass banks' anti-fraud measures to create fake accounts, launder money, evade sanctions, or fund illegal activities.

Another challenge is the lack of collaboration between teams and organisations. However, I've noticed improvements, particularly in communication and acknowledging the need for shared data to detect and combat fraud. Through data standardisation, internal systems can communicate better, even with privacy protections like GDPR in place. With encryption, data can be analysed without revealing the identities behind it. Banks are increasingly collaborating on KYC utilities to streamline customer onboarding and detect fraud, while law enforcement is also joining the effort to catch fraudsters.

Key Strategies for Banks: Focusing on Data, Team Collaboration, and a User-Centric Culture

So, what lessons can we apply to our organisations moving forward? What trends should we watch for 2025 and beyond? Given that the webinar focused on the evolution of KYC, it’s crucial to think about the next strategies to adopt.

If I were part of the C-suite in a bank, I would focus on three key areas:

• Data
• Teams/Collaboration
• Culture

DATA: This is crucial, especially in the context of GenAI. Clean and reliable data helps identify genuine customers. While technologies like GenAI can forge documents, spoof voices, and create deepfake videos, it's the unique quirks captured by data that can distinguish real customers from imposters. Currently, device and behaviour data are the most reliable signals since they’re harder to manipulate.

To acquire this data, organisations can source it externally or generate synthetic datasets. The challenge is maintaining the quality and relevance of these datasets over time. Every organisation needs dedicated data science and engineering teams to leverage both internal and external data effectively.

It’s also important to understand the data’s origins and how conclusions are drawn to avoid the ‘black-box’ effect. The data should be explainable, fine-grained, and easily auditable.

Real-time data needs to be connected to geopolitics, culture, social media, and media in general, particularly for adverse media insights.

I was impressed during a Europol demo showing how a graph of data points on a suspect can turn into a complex, unpredictable shape.

TEAMS / COLLABORATION: As the saying goes, ‘Alone we can do so little, together we can do so much’. Collaboration is increasingly important within organisations, especially in banking. For example, FRAML (Fraud and AML) combines fraud detection and AML data, requiring close teamwork between these departments. Collaboration should also extend beyond the organisation—banks should share data, and law enforcement agencies should work with both private and public entities to detect fraud more effectively.

CULTURE CHANGE: For banks to succeed in the next decade, they need to adopt a user-centric culture. Their purpose should be to offer meaningful, secure, and valuable financial services, not just to make a profit. Products should feel purposeful and build trust with customers. Internally, employees should feel valued, heard, and empowered to collaborate.

After all, the financial services a bank offers can impact a customer’s life deeply, especially in vulnerable moments. If a bank can prove it is reliable and trustworthy, customers will commit for the long term.

Key Digital Identity and KYC Trends to Watch for 2025: EUDI, mDL, Verifiable Credentials, and Emerging Tech

In 2025, some key developments to watch are the rise of digital identity wallet initiatives, such as the European Digital Identity Wallet (EUDI) and the mobile Driver’s License (mDL) in the US.

European Digital Identity Wallets (EUDIW) are designed to simplify processes like opening bank accounts or traveling. These wallets will help citizens validate their identities for various purposes, streamlining access to services.

mDLs, more than just digital copies of driver’s licenses, follow ISO/IEC 18013 standards and offer high-security, portable identities. They provide many advantages over traditional licenses, including selective disclosure of information. mDLs streamline customer onboarding, reducing errors and fraud associated with manual checks, and speeding up the process for financial institutions.

Another concept to keep an eye on is verifiable credentials (VCs). These digital credentials are based on open W3C standards and can represent information from physical documents (like a passport or ID) or digital-only data (such as ownership of a bank account). VCs are tamper-resistant and instantly verifiable, offering greater security and efficiency compared to physical credentials.

Pre-KYC processes could also revolutionise customer onboarding. By leveraging advanced screening tools and AI, digital banks, fintechs, and payment companies can filter out fraudsters early in the process, lowering identity verification costs and reducing customer friction.

Banks are increasingly using eIDs (electronic IDs) to enhance secure digital interactions. These wallets store identity credentials like driver’s licenses and official documents, helping banks streamline onboarding, improve customer relationships, and comply with regulatory requirements. eIDs also support Open Banking and Open Finance initiatives, and banks are considering issuing eIDs themselves to strengthen their position in the digital identity space.

Finally, as more traditional banks embrace crypto and stablecoins, we may see changes in how these accounts operate, potentially impacting the KYC process in ways we don't fully understand yet.

A big thank you to SEON for inviting me to join the webinar, to my fellow panelists for such an engaging and insightful dialogue, and of course, to the audience for taking the time to join us and share your thoughts—it was a pleasure!