Dream of Opening an Account Shattered: Why is KYC so Difficult?
Awei stared at the notification on his phone screen: “Verification failed, please resubmit your information.” This was the fourth time he had received the same message. In order to catch up with the Bitcoin express, he decided to apply for a cryptocurrency exchange account. However, the seemingly simple KYC process 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, trying three times before finally passing. Next was a handwritten photo of a designated text. He made sure his handwriting was neat and legible, but the system prompted that the handwriting was blurry. He tried again with a thicker pen, but still failed.
The last step was a selfie. Awei tried to find the brightest spot indoors, but was prompted that the image was not clear enough. Determined, he even went to the balcony, but the strong sunlight caused overexposure. He gritted his teeth and tried five times, wasting an entire afternoon, but still received the result of “verification failed.”
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 constantly closing door.
The complexity and inefficiency of identity verification have made the once anticipated account opening journey frustrating, reflecting the pain points of the traditional KYC process.
Li Jiguang and Xu Naihe, with backgrounds in white hat hacking, originally intended to start a cryptocurrency exchange. However, during the research process, they discovered that the identity verification process, which is essential for exchanges, is a pain point for both enterprises and users.
The identity verification process is not only complicated and insecure, but also time-consuming and laborious, resulting in a poor user experience. Therefore, often before users start using the service, many of them have already chosen to leave because it is “too troublesome.” In 2019, Li Jiguang and Xu Naihe founded KYC company Authme, 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 documents such as ID cards, passports, driver’s licenses, as well as their own photos or even videos to confirm the customer’s true identity and prevent fraud, money laundering, and other criminal activities.
Confirming the legitimacy of user identities can help companies timely identify and prevent suspicious fund flows, complying with Anti-Money Laundering (AML) regulatory requirements. In addition, through KYC identity verification, it is also possible to reduce incidents of identity theft and fraud by fraud groups, protecting the funds and data security of companies and users.
“What banks or insurance companies care most about is property loss,” added Li Jiguang, CEO of Authme. Assuming a user’s identity is impersonated, it may not only result in financial losses, but also affect the user’s personal credit. Not to mention the insurance industry, which may face moral risks such as “harming lives to make insurance money.”
In addition to highly regulated industries such as financial services and virtual currency operators, businesses such as electronic payments, online shopping, car rentals, and dating platforms also have a need for online identity verification to comply with regulatory requirements. For example, car rental companies need to verify that users have a driving license, and dating apps have gradually realized the importance of identity verification to address the problem of rampant fraud.
Deepfake Faces Everywhere! How to Deal with KYC?
In recent years, fraud methods 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. Finally, they successfully applied to change the user’s phone number, email, and Google Authenticator, resulting in a significant loss of assets.
These incidents demonstrate that traditional KYC systems are caught between ensuring security and improving user experience: overly strict verification processes deter users, but technical vulnerabilities expose companies to significant risks.
Faced with increasingly sophisticated fraud methods such as forged documents and deepfake-generated fake faces, KYC processes must also undergo technological upgrades and engage in an “arms race” against fraud. Technologies such as image analysis, device security checks, and comparison with government databases have become standard features.
To solve all these problems, 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 textures, facial depth, skin textures, and microvascular flow to prevent identity forgery and deepfake attacks.
“When encountering such methods, 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 to confirm that it is indeed the person.”
In addition, Authme’s facial matching technology can quickly confirm that the user is the same person as the photo on the ID card, even if they have lost or gained weight, or even if it is a photo from middle school, it can be recognized through AI technology with a recognition rate of up to 99.7%.
Application Rejected Again! The Biggest Pain Points for KYC Operators and Users
For financial services, car rental platforms, or even dating apps, the value of KYC is no longer just about compliance with regulations; it is also crucial for building user trust and satisfaction.
However, the challenges of identity verification are not limited to 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 or requires repeated applications 3-4 times, the user may never use it again.”
The more complex the process, the more likely potential users will 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 time-consuming and labor-intensive. Different reviewers may have different standards, creating security vulnerabilities.
To comply with regulations, companies often have to spend a lot of costs, and users have to go through the painful “application loop,” making both sides miserable.
With the help of AI technology, Authme now only requires users 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 “great 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. Next, they plan to further optimize digital identity verification services, including strengthening cloud security deployment and implementing quantum encryption foundations to prevent interception during communication processes and ensure data privacy and system integrity.
