**Dream of Opening an Account Shattered: Why is KYC So Difficult?**
Ah Wei stared at the notification on his phone screen: “Verification failed, please resubmit your information.” This was already the fourth time he received the same message. In a bid to ride the Bitcoin express, he decided to apply for an account with a cryptocurrency exchange, only to find that what seemed like a simple KYC process turned into a time-consuming nightmare.
Following the requirements, Ah Wei first took a photo of his ID, but it was rejected due to glare. He changed the angle and lighting, trying three times before it finally passed. Next came a photo of a handwritten text, which he carefully made legible, but the system indicated that the handwriting was unclear. He used a thicker pen and tried again, but still failed.
The final step was a selfie. Ah Wei searched for the brightest spot indoors, but was met with the prompt that “image clarity is insufficient.” Frustrated, he even ran out to the balcony, only to have the strong sunlight cause overexposure. He grit his teeth and retried five times, consuming an entire afternoon, yet the result remained “verification not passed.”
In fact, such scenarios are not uncommon in traditional identity verification processes. For many users hoping to enter the Web3 world, the KYC (Know Your Customer) process feels like a continuously closing door. The cumbersome and inefficient identity verification has turned what was supposed to be an exciting account opening journey into a frustrating experience, reflecting the pain points of past KYC processes.
Li Jiguang and Xu Naihe, both with backgrounds as white-hat hackers, initially planned to start a cryptocurrency exchange. However, during their research, they discovered that the identity verification process essential for exchanges posed a significant challenge for both businesses and users. The KYC process is not only complex and with low account security but also time-consuming and labor-intensive, leading to a very poor user experience. Consequently, many users abandon the process before they even start using the service, simply because it is “too troublesome.” In 2019, Li Jiguang and Xu Naihe established the KYC company Authme, determined to reshape the KYC process, making identity verification faster, safer, and smarter.
**What is KYC? Why is KYC Important?**
KYC (Know Your Customer) is an identity verification process that requires users to upload identification documents such as ID cards, passports, and driver’s licenses, along with a photo of themselves or even a video, to confirm the customer’s true identity and prevent fraud, money laundering, and other criminal activities.
Verifying the legitimacy of a user’s identity helps businesses promptly identify and prevent suspicious fund flows, complying with anti-money laundering (AML) regulations. Additionally, through KYC verification, the risk of identity theft and fraud can be minimized, protecting the financial and data security of both businesses and users.
“The main concern for banks or insurance companies is actually property loss,” added Authme’s CEO Li Jiguang. He explained that if a user’s identity is impersonated, it could not only result in financial loss but also affect their personal credit. This is particularly relevant in the insurance industry, where there may be moral hazards such as “risking life for insurance payouts.”
Aside from highly regulated industries such as financial services and virtual currency providers that are required to conduct KYC due to regulatory demands, other sectors such as electronic payments, online e-commerce, car rentals, and dating platforms are also beginning to show a demand for online identity verification. For example, car rental companies need to verify that users have valid driving qualifications, while dating apps are increasingly recognizing the importance of identity verification to combat the prevalence of scams.
**Deepfake Technology on the Rise! How Does KYC Respond?**
In recent years, fraud methods have continuously evolved, particularly with the rise of deepfake technology, which has made identity verification significantly more challenging. Earlier this year, a user of an international cryptocurrency exchange lost $2 million due to deepfake technology, shocking the industry. Hackers exploited leaked personal data to hack into the user’s email, reset the password, and created fake identification and facial images using AI and deepfake technology, successfully passing the exchange’s KYC review. Ultimately, they managed to change the user’s phone number, email, and Google Authenticator, leading to substantial asset loss for the user.
These incidents highlight that traditional KYC systems are caught in a dilemma between ensuring security and enhancing user experience: overly stringent verification processes deter users, while technological vulnerabilities pose significant risks to businesses. To counter increasingly sophisticated fraud methods, such as forged documents and deepfake-generated faces, KYC processes must undergo technical upgrades, engaging in an “arms race” against fraud. Multi-layered technologies including image analysis, device security checks, and government database comparisons have now become standard.
To address all these issues, Authme utilizes its self-developed technologies including AI identity verification, OCR document recognition, NFC chip document verification, and facial recognition, minimizing the chances for fraudsters and identity thieves to exploit loopholes.
Li Jiguang pointed out that the KYC verification process not only compares data with government databases but also analyzes subtle biometric features such as photo light texture, facial depth, skin texture, and microvascular flow to prevent identity forgery and deepfake attacks.
“When encountering such methods, we analyze whether the skin texture of the face is normal, if the lighting on the face matches the background, or if it is actually a mask, etc. We use AI technology to assist in analysis to confirm that this really is the person.”
Additionally, Authme’s facial recognition technology can quickly verify that a user matches their ID photo, even if they have lost weight or used a photo from middle school, thanks to AI technology, achieving a recognition rate of 99.7%.
**Application Rejected! KYC Becomes the Biggest Pain Point for Businesses and Users**
For businesses in financial services, car rental platforms, and even dating apps, the value of KYC is not only about regulatory compliance but also about enhancing user trust and satisfaction. However, the challenges of identity verification extend beyond security; optimizing user experience is equally critical.
“Often, users want to open an account because they have an immediate need,” Li Jiguang stated. “Whether it’s opening an exchange account or renting a scooter, if KYC verification takes two days and requires 3-4 repeated applications, users may never return.”
The more complex the process, the more likely potential users are to choose to abandon it. Only when verification becomes fast, intelligent, and secure can KYC truly fulfill its potential. Traditional KYC processes rely heavily on manual reviews, which are not only time-consuming but also subject to varying standards from different reviewers, creating security vulnerabilities.
To comply with regulations, businesses often incur significant costs, while users must endure a painful “application cycle,” causing frustration on both sides. However, with the help of AI technology, users can now simply upload their ID photos and take a quick dynamic selfie with their mobile phones, allowing the system to rapidly recognize their identity, completing the entire process within three minutes.
Now, everything can finally be completed as users expect, allowing easy verification and entry into the Web3 world without undergoing another “application adventure.” Currently, Authme supports documents from over 190 countries worldwide and a diverse array of application scenarios, including financial services, electronic payments, e-commerce, and social media. In the future, they plan to further optimize digital identity verification services, including strengthening cloud security deployments and laying the groundwork for quantum encryption to prevent interception during communication and ensure data privacy and system integrity.