Financial Institutions and Fintech providers advance verification processes to meet tightening regulations and defend against fraud and money laundering 

Most financial services companies surveyed (98%) must manually verify their business customers when onboarding new accounts, an operational inefficiency that can lead to regulatory non-compliance and increased fraud and money laundering risks. To address these challenges, efficient and adaptable business and entity verification solutions incorporating greater data accuracy and recency are in growing demand. In Liminal’s Market and Buyer’s Guide for Business and Entity Verification in Financial Institutions and Fintechs, it’s estimated that a global total addressable market (TAM) for business and entity verification in financial services and fintech is projected to reach $4.4 billion in 2024, and is expected to grow at a compound annual growth rate (CAGR) of 6.1% to reach $5.5 billion by 2028.

Liminal, a leading market intelligence and strategy advisory firm in digital identity and cybersecurity, released new research into the rapidly evolving business and entity verification (BEV) landscape within the financial services and fintech sectors. Traditionally known as “know your business” for Know Your Customers (KYC) regulatory requirements, business and entity verification has emerged to address broader market opportunities facing the increased demand to verify legal entity attributes beyond compliance, including reducing fraud and money laundering risk and improving customer experience.

“As we envision the future landscape, business and entity verification trajectory aligns with the imperatives of innovation and efficiency. We expect to see AI and machine learning play a more critical role in solving the increasing demand for automated solutions, and the focus on streamlining technology stacks will point in the direction of integrated identity platforms as a competitive advantage,” said Jennie Berry, President at Liminal.

The current business and entity verification approach involves a mix of in-house reviews and third-party vendors with varying success levels. As regulatory standards tighten globally, operational efficiencies are impacted, increasing onboarding times and leading to frustration. Financial institutions seeking new solutions will transform these processes, providing greater accuracy and agility in navigating compliance challenges, including cross-border verification and advanced functionalities to address concerns for fraud and priorities for better user experiences.

In October 2023, Liminal conducted survey research among B2B technology buyers across financial institutions and fintech providers in five regions globally, further validated through interviews with business executives and industry experts. The research revealed several key findings, including:

  • Challenges in cross-border verification: Cross-border BEV leads to extended onboarding times for 86% of financial institutions and fintech buyers, primarily due to the complexity of managing UBOs in diverse global jurisdictions.
  • A growing trend towards automated solutions: While 98% of buyers rely on manual reviews, approximately 80% consider automation a crucial purchasing criterion.
  • Preference for third-party solutions: Most buyers (54%) favor aggregated third-party solutions, streamlining verification by bypassing slow government processes and enhancing efficiency and resource savings.
  • Priority capabilities: Buyers in small, medium, and large financial institutions and fintechs prioritize six primary solution capabilities, including TIN verification, UBO identification, continuous KYB, and PEP/sanctions.
  • Critical purchasing criteria: Buyers prioritize accuracy (96%), regulatory compliance (88%), and data freshness (84%). Cost is crucial for 56% of buyers.

About Liminal:

We are fluent in bringing certainty and direction to the liminal space of transition and growth. From market entry, fundraising, and strategic evaluations to early company ideation and expansion through exit, we guide our clients through every rite of passage. Since 2016, we provide strategic advice and analytical services to support clients in business decisions at all stages.

After years of closely watching the evolution of the data economy, we’ve noticed a pattern – quietly and invisibly connecting each sector and every business. The result: our proprietary methods and tools are shaping markets and building industries. We don’t just assess the landscape or provide guidance for immediate needs. We guide the world’s biggest investors, leaders, governments and organizations, answering questions with decisive action. We have the keys to rare and valuable insight – where the most in-depth repository of knowledge and market-makers converge to build the future.

Published by Liminal December 12, 2023

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Source: Liminal