55% of Crypto Firms Plan to Increase Identity Verification Budget, Report

By Soko Directory Team / Published June 30, 2022 | 10:04 am

KEY POINTS

Data from the 200 globally surveyed companies indicated that 55 percent of businesses spend between $1,000 and $10,000 on verification budgets. More than 20 percent of the surveyed companies spend between $10,000 to $100,000, while 6 percent spend over $100,000 monthly.

KEY TAKEAWAYS

Almost 80 percent of the surveyed businesses plan to enter new markets or acquire new licenses within the next 12 months. This underscores the demand for adequate user verification and AML compliance.

Fraud prevention remains a key challenge for the crypto industry, and a new report by Sumsub indicates that more than half of crypto companies (55 percent) plan to increase their budget for verification.

The report is the first-ever to highlight verification practices, regulatory compliance, and the future of identity verification among crypto businesses.

One of the key findings from the report indicated that in identity verification practices, nearly 80 percent of crypto businesses use automated KYC solutions.

KYC or Know Your Customer refers to the mandatory process of identifying and verifying the client’s identity when opening an account and periodically over time.

The remaining 18 percent spend less than $1000 a month. Notably, more than half of respondents (55 percent) plan to increase their budget for verification.

Users getting verified on these crypto platforms are younger audiences (average 30 years), unlike in 2021, when the average age was 33. And although the gender ratio varies across countries, 80 percent of those verified are men.

Since crypto businesses are required to perform identity verification by law, it is unsurprising that 55 percent of the surveyed companies noted that staying compliant with AML regulations is their main verification goal.

While using identity verification solutions, 26 percent of businesses indicated building trust in users and partners as a key goal. In comparison, 17 percent of those surveyed stated fraud protection as a primary goal.

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The findings also indicated that 47 percent of crypto businesses employing automated verification feel they have strong fraud detection. Only 31 percent of those who manually check their users feel the same way.

Accordingly, 15 percent of businesses using manual verification feel they have low fraud protection, while just 4 percent of automated solutions adopters feel the same.

In the first quarter of 2021, the most commonly forged documents were from Kenya, Cameroon and Iraq.

Most of these 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 for forgery attempts.

While these companies are hoping to tame such challenges, they are torn between using 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, considering possible regulatory changes in the near future.

In the report, Sumsub’s experts offer actionable solutions for staying ahead of the game in the crypto world.

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.

While examining practical ways to balance AML compliance and user pass rates, Sumsub found that automating verification is the first and most evident step.

This allows businesses to achieve an average verification time of 50 seconds, spending 70 percent less time on compliance tasks while reducing costs by 40 percent.

Other measures might include tailoring verification flows to different customer segments based on risk profiles and splitting the onboarding process into several steps, or “levels”.

When appropriately applied, level-based identity verification significantly reduces drop-offs during onboarding and ensures strong fraud protection.

In the meantime, almost 80 percent of the surveyed businesses plan to enter new markets or acquire new licenses within the next 12 months. This underscores the demand for adequate user verification and AML compliance.

You can download the whole report through this link: https://sumsub.com/crypto-report/.

About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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