Liminal Link Index: Know Your Customer (KYC)

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Contents

• Introduction
• Market Overview
• Vendor Landscape
• Use Case Overview

Market Overview

Key Takeaways

1. Synthetic Identities and Deepfakes Challenge Identity Verification Standards: Financial institutions struggle to combat AI-generated fraud, with 87% of organizations unequipped to handle deepfakes and 79% unprepared for challenges with synthetic identities. The primary challenges include a lack of advanced AI/ML models to detect synthetic content and dependence on outdated legacy systems lacking agility, integration capabilities, and real-time adaptability. Institutions must enhance their detection capabilities as fraud techniques evolve to prevent traditional KYC measures from becoming ineffective.
2. Perpetual KYC (pKYC) Gains Momentum as Static Compliance Checks Become Obsolete: pKYC adoption is accelerating as institutions seek automated real-time risk monitoring over periodic, manual reviews. Among large financial institutions, 34% have already adopted pKYC, and 61% plan to implement it, while mid-sized organizations face resource constraints limiting adoption. 76% of pKYC adopters report improved compliance accuracy and faster risk detection, emphasizing the shift toward continuous compliance models that reduce reliance on outdated, static KYC workflows.
3. Mobile Driver’s Licenses (mDLs) Show Limited Adoption as Existing AML Solutions Remain Sufficient: mDLs are often cited as a potential digital identity solution for AML. However, few institutions currently use them; overall adoption has yet to materialize. While larger organizations show some interest (45% exploring mDLs), adoption is stalled by a lack of regulatory alignment, interoperability challenges, and the absence of a compelling compliance advantage over existing solutions. Without clear regulatory backing or a demonstrable efficiency gain, mDLs remain an unproven tool in AML workflows.

Current Challenges

• Integration Complexity Remains a Barrier for Organizations: The complexity of integrating automated solutions with existing systems is a major barrier, with 66% citing it as a challenge in KYC automation.
• Synthetic Identities and Deepfakes are Emerging as the Most Pressing Threats in Identity Verification: A majority of organizations feel unprepared for synthetic identities (79%) and deepfakes (87%), highlighting challenges posed by gen-AI in onboarding.
• Geopolitical Developments and Sanctions Drive Stricter Compliance Requirements: Geopolitical developments and sanctions have increased enhanced due diligence requirements for 40% of organizations and verification challenges for 32%.

Future Demands

• pKYC Is Becoming the New Standard: The market is moving toward pKYC, with 72% planning adoption within two years, shifting from static onboarding to continuous risk assessment.
• mDLs Are Gaining Traction: As digital ID ecosystems mature and regulatory frameworks catch up, mDL consideration is accelerating in adoption, with 69% of practitioners now considering them for identity verification.
• Increase in Importance in Partnerships and Analytical Capabilities: While accuracy and compliance remain core to KYC, partnerships and analytics are gaining ground, up 17% and 12%, respectively. This reflects a need for broader geographic coverage and smarter tools to detect increasingly complex fraud.

Leading Key Purchasing Criteria (KPC) for KYC Solutions

• Accuracy: 91% of KYC Practitioners consider accuracy important when selecting a solution.
• Data Quality: 89% of KYC Practitioners consider data quality important when selecting a solution.
• Regulatory Compliance: 89% of KYC Practitioners consider regulatory compliance important when selecting a KYC solution.
• Scalability: 79% of KYC Practitioners consider scalability important when selecting a KYC solution.

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