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14/07/2026 4:21 pm
TL;DR: KYC programmes still create major operational and customer-experience strain, and large financial institutions can spend up to $500 million annually on compliance, according to Smile ID citing Thomson Reuters. The practical issue is not just cost but whether identity verification, fraud controls, and regulatory change can be managed without excessive friction.
NHIMG editorial — based on content published by Smile ID: top five KYC challenges and solutions
By the numbers:
- Large financial institutions spend up to $500 million annually on KYC compliance.
Questions worth separating out
Q: How should organisations balance KYC assurance with customer experience?
A: Use risk-based onboarding so low-risk customers complete a lighter flow and higher-risk cases receive deeper checks.
Q: Why do false positives create security and compliance problems in KYC?
A: False positives waste analyst time, frustrate customers, and encourage manual workarounds that weaken consistency.
Q: What do teams get wrong about global KYC workflows?
A: Teams often assume a single onboarding flow can satisfy every market if the form is long enough.
Practitioner guidance
- Map KYC decision points by risk tier Separate low-risk, medium-risk, and high-risk onboarding paths so the same verification depth is not applied to every applicant.
- Measure false positives and abandonment together Treat rejected legitimate customers as a control failure signal, not just a service issue.
- Add layered checks for fraud-prone onboarding journeys Use document verification, biometric checks, and anomaly detection together for cases with elevated risk, especially when evidence quality is weak or the applicant profile is inconsistent.
What's in the full article
Smile ID's full article covers the operational detail this post intentionally leaves for the source:
- Step-by-step selection criteria for KYC software features such as OCR, biometrics, and AML screening.
- Detailed guidance on choosing between manual review, automation, and hybrid onboarding flows.
- Practical considerations for integrating KYC tools with CRM, ERP, and other existing systems.
- Country-specific compliance and data protection points that affect regional deployment choices.
👉 Read Smile ID's analysis of the top five KYC challenges and solutions →
KYC challenges and customer friction: what IAM teams need to know?
Explore further
14/07/2026 4:29 pm
KYC is no longer just an onboarding control, it is an identity assurance system under constant attack. The article shows that fake documents, deepfakes, and operational friction are all part of the same governance problem. If the verification stack cannot distinguish legitimate identity from engineered identity without making the customer journey unusable, the programme is under-designed for current fraud conditions. Practitioners should treat KYC as a continuously tuned assurance workflow, not a one-time gate.
A few things that frame the scale:
- 72% of organisations have experienced or suspect they have experienced a breach of non-human identities, according to The 2024 ESG Report: Managing Non-Human Identities.
- Two-thirds of enterprises have endured a successful cyberattack resulting from compromised non-human identities, with a quarter encountering multiple attacks.
A question worth separating out:
Q: Who is accountable when KYC requirements change across jurisdictions?
A: Accountability should sit with a named compliance owner and an operational owner who can update workflows, training, and evidence requirements as regulations change. KYC becomes fragile when ownership is split across legal, compliance, and product teams without a clear control steward. Clear governance is essential for auditability and change management.
👉 Read our full editorial: KYC compliance challenges are reshaping identity verification at scale
