Diversity in the financial ecosystem is no longer a trend—it’s the norm. Gone are the days when personal finance required visiting a physical bank branch. Today’s financial landscape is dominated by digital-first services.
According to RelyComply, FinTech firms have been pivotal in this shift, offering alternative solutions to traditional lenders and banks with a clear emphasis on innovation, speed and user experience. According to McKinsey, the FinTech sector experienced a 21% revenue boost in 2024 and could grow by as much as 15% annually by 2025—three times faster than conventional banking.
Yet this rapid expansion is increasingly constrained by regulatory hurdles. Know Your Customer (KYC) and Know Your Business (KYB) compliance obligations, while critical to ensuring security and trust, are frequently viewed as bottlenecks. Financial institutions that fall short on compliance risk onboarding high-risk individuals—including politically exposed persons (PEPs) and sanctioned entities—which could lead to reputational damage and stunted growth.
KYC isn’t just a regulatory box to tick—it’s foundational to long-term success. When handled strategically, streamlined KYC processes help firms meet stringent regulatory demands without stifling the customer experience. In today’s competitive market, this balance can be the difference between scaling successfully and falling behind.
Technological change has upended the dominance of legacy financial institutions. FinTechs and non-bank financial entities offer an ever-expanding array of products such as peer-to-peer (P2P) payments, buy now pay later (BNPL) schemes, insurtech solutions and crypto trading platforms. These alternatives cater to modern financial goals and reach underserved populations, especially where mobile penetration outpaces financial literacy. However, accessibility must be matched with strong compliance practices—especially as many FinTechs lack the financial muscle to absorb large-scale regulatory costs in the same way big banks can.
For new entrants, effective KYC compliance is both a challenge and a necessity. Customers are drawn to FinTechs for ease and affordability, but burdensome verification processes can quickly drive them away. Deloitte reports that 38% of customers abandon onboarding if it feels too lengthy or invasive. Manual processes not only slow growth but also increase the risk of human error. Emerging markets, which depend on innovative and accessible finance solutions, stand to lose the most if compliance processes are not optimised.
To mitigate these issues, many firms are turning to automation. Automated identity screening and verification tools enable faster onboarding, reduce false positives, and lower operational costs. Without these, compliance teams may spend up to 22 hours per Suspicious Activity Report (SAR), with 95% of alerts proving false. This inefficiency contributes to the estimated $270bn annual global cost of compliance.
Enter perpetual KYC (pKYC)—a dynamic, machine learning-powered approach that allows for real-time customer monitoring and instant alerts on any data anomalies. Compared to the 105 hours it can take to complete manual KYC for retail customers, pKYC slashes that time to as little as 10 minutes. It not only speeds up onboarding but enables financial institutions to identify risks before they escalate. Though only 20% of smaller institutions have adopted pKYC to date, its compatibility with broader anti-money laundering (AML) frameworks makes it a cost-effective and competitive compliance solution.
Ultimately, financial institutions must view KYC not as a regulatory burden but as a growth enabler. Risk-based due diligence systems that adjust to business needs and onboarding volumes are crucial. Real-time watchlist screenings, automated workflows and pKYC tools are becoming essential to staying ahead in a crowded and fast-moving market.
Compliance isn’t just about survival—it’s about sustainability. Scalable KYC supports trust, growth and innovation, ensuring FinTechs can continue reshaping the financial landscape in safer, more inclusive ways.
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