The challenges of KYC

KYC (Know Your Customer) refers to the process by which financial institutions and payment services verify the identity of their customers and collect relevant information to reduce the risk of financial crime, such as money laundering and terrorist financing. While KYC is very important for ensuring the integrity of the financial system, it also presents some challenges for payment services. Here are some of those challenges:

Complexity of regulations

KYC requirements vary by country and may be affected by different laws and regulations. This can lead to a complex landscape in which payment services must comply with different rules depending on the jurisdictions in which they operate. Understanding and complying with these complex regulations can be challenging.

Data collection and verification

Collecting and verifying the necessary customer data can be a time-consuming process. Payment services often need to collect and verify customers’ IDs, addresses and other documents. This can lead to delays in opening accounts or performing transactions, which can negatively impact the user experience.

Privacy and data protection

The collection and processing of personal data raises privacy and data protection issues. Payment services must ensure that customer data collected is stored securely and used only for legitimate purposes. This requires the implementation of robust security measures and compliance with relevant privacy laws, such as the General Data Protection Regulation (AVG) in the European Union.


Implementing and maintaining an effective KYC process involves costs. Payment services must invest in technologies, systems and qualified personnel to meet KYC requirements. These costs can be especially heavy for smaller players in the market.

User Experience

While KYC is essential for reducing financial crime, the extensive verification process can negatively impact the user experience. Customers may become frustrated with the amount of information they have to provide or the time it takes to verify their identity. It is important for payment services to strike the right balance between complying with KYC requirements and providing a seamless user experience.

To deal with these challenges, payment services are seeking solutions such as automated KYC processes, digital identity verification, blockchain-based systems and collaboration with third-party service providers that specialize in KYC services. By embracing innovative technologies and partnerships, payment services can improve the efficiency of their KYC processes while meeting regulatory requirements and customer expectations. Addition Knowledge House provides important support in the above process by providing automated KYC solutions, formulating policies, training (young) professionals as well as providing capacity.