Shaking up KYC With Open Banking: iDenfy’s Bank Verification Tool
TL;DR
With the rise of digital assets, cryptocurrencies, and stricter regulations like MiCA, businesses face increasing challenges in complying with Know Your Customer (KYC) regulations.
On October 14th, iDenfy announced the release of a bank verification tool that combines AI and open banking data to automate KYC compliance. The tool makes identity and financial data verification faster and more secure.
Open banking is a game changer for KYC processes, providing businesses with real-time financial data that enhances risk assessments, verifies the source of funds, and automates compliance.
KYC: No Longer a Box-Ticking Exercise
Effective Know Your Customer (KYC) processes are no longer about ticking regulatory boxes. KYC has become essential for safeguarding businesses from fraud and financial crimes.
As digital assets and cryptocurrencies become more widespread, businesses face increasing challenges. Stricter regulations, such as the Markets in Crypto-Assets (MiCA), puts pressure on companies, especially those in high-risk sectors, to adopt more secure and automated compliance tools.
Enter iDenfy, a Lithuania-based RegTech company. iDenfy has responded to these challenges by launching a new tool: Bank Verification. Leveraging the power of AI and open banking data, this solution not only simplifies KYC compliance but also helps businesses verify user identities and financial data in real-time. Combining AI with Open Banking data is a significant step forward in automating the KYC process.
In this blog post, we will explore the value of iDenfy’s new product, how open banking connectivity is transforming KYC processes, and why adopting these solutions can help businesses stay ahead in the fight against financial crime.
The Rising Complexity of KYC
High-profile financial scandals, such as the Danske Bank money laundering case, serve as stark reminders of the consequences of failing to implement adequate KYC measures. Between 2007 and 2015, the Estonian branch of Danske Bank laundered €200 billion, highlighting the need for robust identity checks and transaction monitoring.
With fraud on the rise, businesses must quickly and accurately verify their customers’ identities and financial backgrounds. Traditional methods that rely on manual bank data verification are no longer enough. As iDenfy’s CEO, Domantas Ciulde, points out, nearly 50% of companies in the cryptocurrency sector struggle to comply with KYC regulations due to outdated processes, leading to onboarding delays and increased fraud risk.
iDenfy’s Bank Verification tool addresses these issues head-on, combining AI-driven ID verification with an open banking integration to automate customer authentication, access real-time financial data, and streamline compliance for high-risk sectors.
How iDenfy’s Bank Verification Tool Simplifies KYC
iDenfy’s new Bank Verification tool simplifies KYC in the following ways:
Taps into a vast network of over 2,500 banks across 29 countries
Provides businesses with real-time access to customer financial data
Retrieves critical identity details with open banking APIs (customer name, surname, bank information. etc)
Verifies onboarding data against information taken directly from customer bank accounts
This automated process reduces the risk of fraud by ensuring that customer information is accurate while accelerating the KYC process. Manual verification is time-consuming and resource-intensive, often causing bottlenecks in customer onboarding. By contrast, iDenfy’s tool allows businesses to verify identities in real time, enhancing customer experience and compliance efficiency.
Moreover, Banking Verification helps businesses verify the source of funds, a key regulatory requirement. By assessing both historical and current transaction data, businesses can flag suspicious activities early on.
Open Banking: A Game Changer for KYC Compliance
One of the most significant features of iDenfy’s Bank Verification tool is its ability to harness open banking data.
Open banking connectivity allows businesses to tap into real-time, accurate financial information. This data is crucial for both verifying identities and assessing customer risk.
How does open banking data improve KYC processes?
Assessing customer risk profiles: Open banking APIs provide access to detailed transaction histories. This enables businesses to assess a customer’s financial health and detect potential red flags. For example, large sums of unexplained deposits or irregular account activity may indicate fraudulent behaviour. In industries like crypto, tracking the movement of funds is vital to comply with regulations like MiCA.
Verifying the source of funds: The ability to trace the origin of funds is essential for high-risk sectors. By analysing transaction logs and historical data, businesses can ensure that the money involved in transactions comes from legitimate sources
Automating KYC compliance: Open banking APIs automate the retrieval of identity and financial data, eliminating the need for manual intervention. This not only speeds up compliance workflows but also reduces operational costs and minimises human error.
By integrating open banking data into KYC processes, businesses can significantly improve their ability to detect fraud, meet regulatory demands, and deliver a faster, more seamless onboarding experience.
Open Banking and the Future of KYC
Open banking is emerging as one of the most valuable tools for enhancing KYC processes. It offers deeper insights into customer identities and financial activities by providing real-time access to financial data from both consumer and business accounts through PSD2-compliant APIs. This data significantly reduces the risk of fraud and ensures compliance with evolving regulations.
As more businesses in high-risk sectors like crypto and fintech embrace open banking solutions, the opportunities to streamline KYC processes will continue to expand. With real-time financial data integration, businesses can stay ahead of regulatory demands, improve operational efficiency, and enhance their overall competitiveness.
Open banking is not just a compliance tool. It plays a crucial role in building a safer, more transparent financial ecosystem for financial institutions and customers alike.
A Leap Forward for KYC
The launch of iDenfy’s Bank Verification tool marks a significant leap forward for businesses seeking to improve their KYC processes and meet the demands of evolving regulations.
By combining AI-driven ID verification with open banking integration, iDenfy offers a solution that not only reduces fraud risks but also enhances the customer experience and speeds up compliance.
As open banking continues to evolve, its role in KYC will become even more critical. Real-time access to bank data provides businesses with the ability to verify customer information more accurately and efficiently, without the need to store sensitive data, reducing both compliance risks and operational costs. This approach ensures that businesses can remain agile in a fast-changing landscape, staying ahead of both fraud threats and compliance demands.