Evolving regulatory landscape, rising digital adoption and the surge in fintech usage is pushing demand for digital identity verification. By 2026, the industry is expected to generate US$17.2 billion in revenue, translating to a compound annual growth rate (CAGR) of 22% over the six-year period, a new report by analyst and consultancy company Goode Intelligence. Identity verification ensures that there is a person behind a process matches the one that is supposed to be. It’s an essential requirement in most procedures to avoid fraud and theft and is referred to know-your-customer (KYC) in the banking sector. Identity verification is ever-so relevant today as interactions are increasingly moving online, forcing financial institutions to embrace new methods to remotely verify users, ensure genuineness and comply with KYC, anti-money laundering (AML) and countering financing of terrorism (CFT) requirements. In 2020, financial companies around the world were fined a collective US$10.6 billion for regulatory non-compliance, including AML/KYC non-compliance, according to the AML/KYC Tracker by payment news platform Pymnts and online identity verification services provider Trulioo.
In Europe, new reforms are in the works and are to set to make the regulatory landscape more complex for financial institutions. The European Commission (EC) is currently expanding its AML efforts and working on new regulation on AML/CFT. The legislative proposals aim to strengthen the European Union (EU)’s AML/CFT rules, introducing measures to enhance the existing framework by considering new and emerging challenges linked to technological innovation including virtual currencies. The EC will also be creating a new EU authority to fight money laundering. The new authority is expected to be operational in 2024. These factors are driving the demand to digitally onboard customers in a compliant and efficient manner. This will result in over 3.8 billion separate identity checks annually by 2026, up from 1.1 billion checks by the end of 2021. Financial institutions around the world are rapidly implementing innovative solutions to address AML/CFT concerns and requirements.