Diversity in financial services has transformed how individuals and businesses access capital. The once slow-moving world of traditional finance—where bank accounts required in-person visits—is being reshaped by the agility and digital-first approach of FinTechs.
According to RelyComply, these companies emerged to challenge legacy institutions, prioritising user experience, accessibility, and speed. The FinTech sector saw a 21% increase in revenue in 2024, with McKinsey forecasting a 15% annual growth rate by 2025—triple that of conventional banks.
Yet, this rapid growth is held back by a significant challenge: compliance. Regulations such as Know Your Customer (KYC) and Know Your Business (KYB) are vital for security but are often treated as barriers to fast onboarding. Gaps in compliance open the door for politically exposed persons (PEPs), sanctioned individuals, or bad actors to exploit weak checks during account creation. For institutions aiming to scale, protecting customer data while enabling swift service is paramount—and efficient, automated KYC systems could be the differentiator.
The FinTech boom is powered by innovation across services like P2P payments, BNPL, InsurTech, and crypto exchanges. This has expanded financial access for underserved populations, particularly in markets where mobile usage is high, but financial literacy remains low. FinTechs are designing user-friendly platforms that help people step into the formal economy while bypassing non-regulated options. However, many smaller players struggle to meet the costly demands of compliance infrastructure, in contrast to traditional banks that can absorb these expenses more easily.
The pressure to onboard customers quickly while staying compliant presents a Catch-22. Elevated KYC costs are often passed on to users, undermining the very affordability that attracts them in the first place. Meanwhile, inadequate KYC systems expose platforms to criminal misuse. According to Deloitte, 38% of users abandon the process if onboarding is too lengthy or intrusive—delays frequently caused by manual reviews and inefficient verification.
Modernising KYC processes with automation is the logical step forward. Automated identity screening drastically reduces investigation times and operational costs, allowing teams to focus on higher-risk cases. With false positives making up 95% of flagged transactions, automation helps filter real risks more accurately, saving valuable resources. Investigating a suspicious activity report (SAR) can take up to 22 hours manually—time that can be cut down significantly with technology.
Adopting perpetual KYC (pKYC) further enhances compliance by continuously monitoring customer data. Unlike traditional KYC, which is performed once at onboarding, pKYC updates risk profiles in real time using machine learning. PwC found pKYC can cut onboarding times from 105 hours to just 10 minutes for each retail customer. It shifts the process from reactive to proactive, detecting suspicious changes as they occur.
Despite the promise, pKYC adoption remains low—just 20% among smaller institutions. Yet, many can integrate it into their existing AML systems without rebuilding their compliance stack. For lean, fast-moving FinTechs, this provides a crucial edge in competing with larger incumbents while ensuring robust security.
Ultimately, compliance must be viewed not as a hindrance but as a strategic enabler. Automated KYC, real-time screening, and pKYC allow firms to scale efficiently, meet regulatory obligations, and provide seamless user experiences. This alignment of growth and risk management is critical to building a safe, inclusive financial ecosystem that can evolve with its users.
This article is the first in a series on scalable KYC. The next instalment will explore specific onboarding challenges in FinTech and how firms can unlock new growth by streamlining compliance.
Copyright © 2025 RegTech Analyst
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