# 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 The primary challenges include a lack of advanced AI/ML models to detect synthetic content and dependence on outdated legacy systems lacking agility, integration capabilities, and real-time adaptability.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accuracy and faster risk detection, emphasizing the shift toward continuous compliance models that reduce reliance on outdated, static KYC workflows.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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