55% of crypto companies plan to increase identity verification budget, Sumsub research finds
Sumsub, a technology company offering an all-in-one technical and legal toolkit to cover the needs of KYC, KYB and AML, has released the first identity verification report for the crypto industry.
Sumsub, a global identity verification software provider, announced today Verification of Identity Position in the Crypto Industry. This is the first ever study of verification practices among crypto firms, combining remote verification statistics with expert insights on regulatory compliance and the future of identity verification.
Sumsub research methodology
For this study, Sumsub surveyed 200 crypto companies and analyzed the millions of identity verification checks performed in 2021-2022. The data will help businesses understand industry verification standards and improve their user experience.
In addition to its data-based insights, the report also includes interviews with legal experts certified by ICA, CySec, and ACAMS, as well as crypto and fraud professionals from Sumsub, mercuryand Noduines.
Key Findings: Identity Verification Practices
The data shows that almost 80% of crypto businesses use KYC automated solutions.
What kind of users are verifying on crypto platforms? According to Sumsub analysts, 80% of them are male (although the gender ratio varies across countries) with an average age of 30 years. This audience is getting younger, since the average age was 33 in 2021. The three most popular languages among crypto users are English, Portuguese and Spanish.
Compliance and budgeting for identity verification
Rypto firms are required by law to carry out identity verification. Therefore, it is not surprising that for 55% of the companies surveyed, their primary verification target is to comply with AML regulations.
26% of businesses indicated that building trust in users and partners was a key goal in the use of identity verification solutions, while only 17% of those surveyed indicated fraud protection as a key goal.
The report also stocks the crypto company’s verified budgets. 55% of businesses spend between $ 1,000- $ 10,000, more than 20% of companies spend from $ 10,000 to $ 100,000, and 6% spend over $ 100,000 monthly. The other 18% spend less than $ 1000 a month. In particular, more than half of respondents (55%) plan to increase their budget for verification.
Fraud in encryption
The results suggest that 47% of crypto firms that employ automated verification feel strong fraud detection; only 31% of those who manually check their users feel the same way. Thus, 15% of businesses that use manual verification feel low fraud protection, while only 4% of adopters feel the same automated solution.
In the first quarter of 2021, the most common forged documents were from Kenya, Cameroon and Iraq. In Q1 2022, most attempts were forged on identity cards and driver’s licenses issued in Vietnam, Bangladesh and Pakistan. The US and Canada were among the top ten countries for forgery attempts.
The biggest challenges in identity verification
Crypto companies face different challenges depending on whether they use automated or manual verification solutions. The challenges of automated solutions are the rejection of bogus applicants and approval rates – but, with manual solutions, verification time, human error, and difficulty entering new markets are long overdue.
Another major challenge is operating in an ever-changing regulatory landscape. That’s why crypto firms need to start building their compliance infrastructure ahead of schedule, taking into account potential regulatory changes in the near future. In the report, Sumsub experts offer actionable solutions to stay ahead of the game in the world of crypto.
Preventing fraud remains a key challenge for the industry. Sumsub’s anti-fraud team noted that an increasing number of fraudsters are using deepfakes and 3D projections to bypass verification, due to increasingly sophisticated and available fraud tools. Fortunately, AI-based biometric face solutions such as animation and face game can fight back against these attacks.
Putting on board best practices for crypto businesses
The study examines practical ways to balance AML compliance and user pass rates. The first and most obvious step is to automate verification. This allows businesses to achieve an average verification time of 50 seconds, spending 70% less time on completed tasks while reducing costs by 40%.
Other measures may include customizing verification flows for different customer segments based on their risk profiles and dividing the boarding process into stages, or “levels”. Properly implemented, it significantly reduces the number of boarding faults and ensures strong fraud protection.
Future plans and trends in identity verification for encryption
Almost 80% of respondents plan to enter new markets or obtain new licenses within the next 12 months. This highlights the demand for effective user verification and AML compliance.
“Building AML compliance requires significant effort”, – explains Peter Sever, Co – Founder and Chief Strategy Officer of Sumsub. – “Even if a business outsources your KYC solution, it still needs to build a baseline AML infrastructure. This includes implementing an AML compliance program, hiring a money laundering reporting officer, and so on. Start preparing in advance for future changes so you have time to stick to the new rules – and penalties – kick in “.
The report also includes expert adoption of the regulatory and verification changes awaiting us in the future, including stricter registration and licensing requirements for crypto providers, wider application of the Travel Rule, stricter requirements for KYC systems, and bigger. Emerging trends are also discussed, such as the introduction of Self-Commanding Identities (SSIs) and “soul bias” (SBTs), KYC practices on augmented metrics, as well as the development of verification solutions for private wallet holders on DeFi platforms .
55% of crypto companies plan to increase identity verification budget, Sumsub research finds –
Source link 55% of crypto companies plan to increase identity verification budget, Sumsub research finds –