Dream of opening an account shattered: Why is KYC so difficult?

Ah Wei stared at the notification on his phone screen: 'Verification failed, please resubmit the information.' This was already the fourth time he received the same message. Eager to ride the Bitcoin express, he decided to apply for an account at a cryptocurrency exchange, only to find that the seemingly simple KYC process turned into a time-consuming nightmare.

Ah Wei followed the instructions to take a photo of his ID, but was rejected due to glare. He changed angles and lighting, trying 3 times before passing. Next, he had to take a photo of a handwritten note, making sure his handwriting was neat, but the system indicated the handwriting was blurry. He took out a thicker pen and tried again, but still failed.

The last step is to take a selfie. Ah Wei struggles to find the brightest spot indoors but is prompted that 'image clarity is insufficient.' Unwilling to give up, he even runs to the balcony, but the strong sunlight makes the image overexposed. He grits his teeth and retries 5 times, wasting an entire afternoon, only to still receive a 'failed verification' message.

Such situations are not uncommon in traditional identity verification processes. For many users hoping to enter the Web3 world, the KYC (Know Your Customer) process feels like a constantly closing door.

The cumbersome and inefficient identity verification process turns the once promising account opening journey into a frustrating experience, reflecting the pain points of past KYC processes.

Li Jiguang and Xu Naihe, who have backgrounds as white hat hackers, originally intended to start a cryptocurrency exchange, but during their research, they discovered that the identity verification process essential for exchanges is a major pain point for both enterprises and users.

The identity verification process is not only complex, with extremely low account security, but also time-consuming and labor-intensive, resulting in a very poor user experience. As a result, many users may choose to leave before they actually start using the service because it is 'too troublesome'. Li Jiguang and Xu Naihe established the KYC company Authme in 2019, 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 a type of identity verification process that requires users to upload identification documents such as ID cards, passports, or driver's licenses, as well as a personal photo or even a video, to confirm the customer's true identity and prevent fraud, money laundering, and other criminal activities.

Confirming the legitimacy of user identities can help businesses promptly identify and prevent suspicious fund flows, complying with Anti-Money Laundering (AML) regulations. Additionally, through KYC identity verification, it can also reduce incidents of identity theft by fraud groups, protecting the funds and data security of both businesses and users.

‘What banks or insurance companies care most about is actually property loss,’ added Authme CEO Li Jiguang. If a user falls victim to identity theft, it could not only lead to property loss but also impact their personal credit. Not to mention the insurance industry, where there could be moral hazards such as 'endangering life to earn insurance money.'

In addition to highly regulated industries like financial services and virtual currency operators, which must conduct KYC to comply with regulatory requirements, businesses in online payments, e-commerce, car rental, or dating platforms are also beginning to recognize the need for online identity verification. For instance, car rental companies must confirm that users have driving qualifications, or dating apps are becoming increasingly aware of the importance of identity verification to tackle prevalent fraud issues.

Deepfake fake faces are everywhere! How does KYC respond?

In recent years, fraudulent tactics have continually evolved, especially with the rise of Deepfake technology, making 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 exploited leaked personal information to hack into user email accounts, reset passwords, and used AI and Deepfake to create fake documents and faces, successfully passing the exchange's KYC review and ultimately changing their phone number, email, and Google authenticator, leading to significant asset loss for the user.

These events demonstrate that traditional KYC systems are caught in a dilemma between ensuring security and enhancing user experience: overly strict verification processes repel users, while technical vulnerabilities expose businesses to significant risks.

In the face of increasingly sophisticated fraudulent tactics, such as forged documents and Deepfake-generated fake faces, the KYC process must also undergo technological upgrades to engage in an 'arms race' against fraud. This includes multi-layered technologies such as image analysis, equipment security checks, and government database comparisons, which have now become standard equipment.

To address all of the above issues, Authme utilizes its own developed AI identity verification, OCR document recognition, NFC chip document verification, and facial recognition technologies to minimize the chances of fraud and identity theft.

Li Jiguang pointed out that the KYC verification process not only compares data against government databases but also analyzes subtle biometric features, such as lighting texture, facial depth, skin texture, and microvascular flow, to prevent identity forgery and Deepfake attacks.

Additionally, Authme's facial recognition technology can quickly confirm that the user and the ID photo are the same person, even if it is a before-and-after weight loss photo or even a photo from middle school, thanks to AI technology, achieving a recognition rate of 99.7%.

Application just won't go through! KYC is the biggest pain point for businesses and users.

For financial services, car rental platforms, and even dating apps, the value of KYC is no longer just about compliance with regulations, but is also key to enhancing user trust and satisfaction.

However, the challenges of identity verification are not limited to security; optimizing user experience is equally crucial.

‘Many times, users want to open accounts because they have an immediate need,’ Li Jiguang stated, ‘Whether it’s to open an exchange account or rent a scooter, if KYC reviews take 2 days and require 3-4 repeated applications, users may never return.’

As the process becomes more cumbersome, potential users are more likely to choose to abandon it altogether. Only when verification becomes quick, intelligent, and secure can KYC truly realize its potential.

Traditional KYC processes rely heavily on manual reviews, which are time-consuming and labor-intensive. The review standards of different people may also vary, creating security vulnerabilities.

To comply with regulations, businesses often incur significant costs, and users must endure a painful 'application cycle', leaving both parties in distress.

With the help of AI technology, Authme allows users to upload their ID photos and take a simple dynamic selfie with their mobile phones, enabling the system to quickly identify their identity, completing the entire process in under 3 minutes.

Now, all of this can finally be completed as users expect, easily verifying their identities and entering the Web3 world without undergoing another 'application adventure.'

Currently, Authme supports ID documents from over 190 countries and a wider variety of application scenarios, including financial services, electronic payments, e-commerce, and social media. They plan to further optimize digital identity verification services, including strengthening cloud security deployments and laying out quantum encryption foundations to prevent communication interception, ensuring data privacy and system integrity.

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