Digital identity verification is a critical aspect for businesses navigating the challenges posed by automated threats. A recent report, resulting from a partnership between PYMNTS Intelligence and Trulioo, sheds light on how the management of identity verification can impact a company’s exposure to fraud, operational costs, and potential growth opportunities. Notably, the report titled “Built or Bought: How KYC/KYB Ownership Shapes Risk, Cost and Growth” explores the dynamics between using internal teams and external providers for identity verification processes, underlying the factors leading to these choices and their consequences.
What Does the Report Highlight?
The report emphasizes that firms which maintain in-house identity verification systems might gain more insight into potential threats. However, the visibility does not guarantee better threat management. Data shows that 78% of companies relying solely on their internal teams experienced losses due to know your agent (KYA) threats. In contrast, businesses using external verification services reported a reduced loss rate of 44% after detecting similar threats. This contrast highlights the potential risk associated with in-house identity verification.
Why Might External Services Be More Cost-Effective?
Companies utilizing external providers for identity checks often witness lower costs in comparison to those relying entirely on internal teams. The average cost of performing an identity check by internal teams stands at $26 per consumer KYC and $51 per business KYB. External teams, however, report these checks at $11 and $20 respectively. Despite higher costs, in-house models frequently encounter increased false positives and transaction declines, revealing inefficiencies.
Historically, past assessments suggest hybrid models can be efficient, as they blend internal knowledge with external expertise. The current report continues to advocate for this blended approach, balancing the strengths of both systems while mitigating individual weaknesses. Nevertheless, oversight and clear performance measures remain essential to enhance their effectiveness.
The findings challenge firms to reconsider their methodologies regarding identity verification. Balancing cost efficiency and risk prevention requires a strategic approach that factors in the strengths and limitations of both in-house and external systems. Adopting a hybrid approach may offer a balanced solution, leveraging internal expertise while benefiting from advanced capabilities provided by external services.
“External identity verification services can effectively minimize risk exposure,” a representative from Trulioo commented.
This suggests that firms opting for external providers might achieve better risk management through structured verification systems, preventing financial losses more efficiently.
Additionally, external firms express concerns about limitations imposed on market expansion due to identity systems.
“The challenge lies in aligning identity verification models with growth strategies,” PYMNTS Intelligence noted.
This highlights the trade-off between efficiency gains and market adaptability when selecting identity verification models.
The diverse implications of identity verification strategies underscore their importance in a global digital economy. Businesses are encouraged to evaluate their existing systems thoughtfully. By integrating a hybrid model or reassessing existing strategies, companies may better position themselves to mitigate risks, control costs, and expand their market presence more effectively.
