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KYC: Fraud Detection In Fintech App


14 min read

Despite tons of innovative security measures, fintech companies always face different types of fraud. From April to June in 2023, investment fraud emerged as the most financially impactful compared to other cyber crimes, resulting in losses of £135.2 million

Can you imagine your business losing tons of money just in one wrong click? Unfortunately, it happens every day. On average, fintech companies experience an annual loss of $51 million due to fraudulent activities.

For example, numerous illegal online lending platforms offer quick cash without any difficulties. This naturally attracts people who need money ASAP, and there are a lot of them out there. This deceptive scheme doesn’t just harm the individuals caught in this trap, but it also poses a threat to legitimate fintech companies. When people fall victim to these scams, they lose trust in legal fintech services, leading them to stop using such platforms altogether. 

Moreover, engaging with illegal online lending platforms puts individuals at risk of having their data and identity stolen by fraudsters, which can result in further financial losses, potentially impacting your business.

And this is only one type of fraud in fintech. There are also other types like phishing, skimming, fake identity, or investment fraud.

If you do not address this issue fast and correctly, your business may incur significant losses. The solution to such problems is effective management, verification processes, KYC tools, and PII (personally identifiable information).

The need for these solutions arises not only from the potential risks posed to you and your company but also from the responsibility to the people who trust you and use your financial products daily. They can lose their money, private data, savings, and the most essential — identity.

If you want to secure your business and users, keep reading to learn how to protect your company by integrating with KYC vendors and preventing fraud.

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The Crucial Role of KYC in Fraud Prevention

Know Your Customer/Consumer (KYC) is the procedure of a business verifying the identity of its clients. During this process, financial institutions analyze the potential risk factors of criminal intentions in the business relationship.

In this phase, we need to block anyone identified as a politically exposed person (PEP), sanctioned people, cybercriminals, and fraudsters. Basically, do fintech fraud detection.

Ensuring compliance through Know Your Customer (KYC) practices is critical for meeting the regulations and protecting your business against significant losses.

There are two possible approaches to consider:

  • Develop an in-house solution. It is a costly, time-consuming, and intricate process, requiring meticulous alignment with regulations.
  • Integrate a specialized KYC solution. You can integrate the KYC solutions provided by third-party vendors, which proves to be a more efficient option. It is much easier to employ KYC integration, which is already pre-built and adheres to regulations, rather than create your own from scratch.

The growing market development for detection and prevention is a great reason to partner with KYC vendors and use this approach to protect your business. The financial fraud prevention market is estimated to achieve a value of $90.07 billion by the year 2030. Fraud analytics and identity theft prevention segments will experience the most significant growth. That’s why my team strongly recommends choosing the second option — integrating with KYC vendors.

How KYC Helps Prevent Fraud

Fraudsters constantly attack all newborn financial institutions. This is because they usually have some holes in the registration process that allow criminally minded individuals to create accounts and perform illegal activities. To identify the person applying for financial services, you should take preventative measures at your fintech. 

Possible KYC software checks and documents:

#1. Identity check uses the photo of a real document to avoid fintech KYC fraud, recognizes data on it, and checks if it is authentic and that it belongs to the user. This step requires using Artificial Intelligence, Machine Learning, Computer Vision, Optical Character Recognition , and Natural Language Processing.

#2. A liveness check is another way to prove the identity and ensure fraud strategy. There are a few ways to authenticate this step with KYC tools:

  • photo
  • video
  • live-streaming

A photo liveness check requires the user to submit a selfie. There can be additional requirements, such as holding a piece of paper in their hand with the current date written on it

A video liveness check asks the user to conduct a live video for anti-fraud detection. During this process, the end-user needs to do some random actions — say the custom expression, move his/her head from side to side, move their eyes, and other movements

The basic requirements are:

  • to be in a quiet place
  • to have good lighting
  • to be the only person in the video

#3. Address proof is often used by fraud detection fintech and helps understand that the user belongs to the place that they had mentioned. Primarily, users need to send the bills (for example, telephone or utility bill). Usually, this kind of check is used as an additional verification step.

How KYC Aligns with Regulations?

Compliance with KYC regulations prevents substantial fines and legal issues. Regulatory bodies worldwide require fintech companies to implement these rules. If your business does not comply with KYC procedures, it can lead to significant financial losses and harm to a company’s reputation.

Know Your Customer rule in banking for businesses upholds the integrity of the economic framework and protects it from criminal exploitation. Financial institutions and other entities handling sensitive customer data should be attentive in observing and reporting any suspicious activities to the relevant governing bodies. Compliance with these rules helps to fight against crimes and guarantees that businesses do not support criminal endeavors.

Know Your Customer legislation differs across countries. Despite variations, AML/KYC regulations globally aim to reduce risks linked to financial crimes. These include:

  1. Verify customer identity. Businesses must collect and confirm legitimate customer identities using relevant documents like passports or national ID cards.
  2. Customer Due Diligence (CDD). Companies need to evaluate customer risk by understanding their financial activities, collecting information on the purpose of the business relationship, and identifying the source of funds.
  3. Enhanced Due Diligence (EDD). Firms must delve deeper into high-risk customers, obtaining extra documentation or information on their background and financial activities.
  4. Monitor customer transactions. Companies must continually watch customer transactions for suspicious behavior or risk profile changes.
  5. Report suspicious activities. Depending on the jurisdiction, firms must promptly report any suspicious activities to relevant authorities, such as the Financial Intelligence Unit in the EU or the Financial Crimes Enforcement Network in the US.

Different countries have specific KYC compliance requirements. Here are a few examples:

United StatesThe USA enforces strict KYC rules through the Bank Secrecy Act (BSA) and the USA PATRIOT Act. Financial organizations must follow the Customer Identification Program (CIP) rules, ensuring they collect and verify customer identification information. Additionally, they must comply with FinCEN’s Customer Due Diligence (CDD) Rule, which mandates identifying and verifying beneficial owners of legal entity clients.
European UnionThe EU has the Fifth Anti-Money Laundering Directive (5AMLD) and the Sixth Anti-Money Laundering Directive (6AMLD), detailing complete KYC requirements for financial institutions and other businesses. These directives require implementing Customer Due Diligence (CDD), identifying beneficial owners, and creating risk-based procedures for ongoing monitoring.
United KingdomThe UK aligns with the EU’s AML directives and has its own regulations, including the Money Laundering Regulations (MLR) and the Proceeds of Crime Act (POCA). These regulations require businesses to conduct Customer Due Diligence (CDD), establish risk-based KYC policies and procedures, and maintain customer information and transactions records.

If you want to learn more about the rules for fintech companies, visit DashDevs’ blog. We have easy-to-read expert articles about regulations in the MENA region, the USA, and the United Kingdom.

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Top KYC Providers in 2024 for Fintech

Our team has been working with various fintech clients with different needs. Consequently, one of our main tasks was to set up clear coordination with different KYC vendors to integrate them into the clients’ products. 

I will share with you the best KYC tools you can use for your business to prevent identity theft and fraud, ensuring users’ security. 

#1. Veriff


  • AML compliance. Strong focus on anti-money laundering compliance.
  • Global reach. Comprehensive coverage supporting 11k+ identity documents from 190+ countries.
  • Swift process. Rapid verifications with a 98% check automation rate.


  • Pricing details might require direct contact.

#2. SEON


  • Digital footprint analysis. Specialized in preventing fraudulent users through digital footprint analysis.
  • Cost-efficient. Offers a free version and plans to cater to various business needs.
  • Industry solutions. Tailored KYC solutions for online lending, banking, insurance, and more.


  • Limited KYC software functionality.

#3. Onfido


  • AI models. Leverages AI models for verifying 2,500 types of KYC ID financial institutions documents.
  • Liveness verification. Offers liveness verification and biometric analysis.
  • KYC and AML. Suitable for both KYC and AML checks.


  • May introduce more friction in the verification process.

#4. Trulioo


  • Huge database. Access to a vast database of 5 billion identities in 195 countries.
  • Business verification. Includes business verification alongside KYC services.
  • Free trial. Allows businesses to try the solution before committing to a plan.


  • Does not provide data enrichment or risk scoring.

How to Choose the Right Tool?

  1. Define your needs. Clearly outline your business requirements, including compliance standards, industry focus, and specific functionalities needed.
  2. Evaluate features. Compare the features of each tool against your requirements. Consider factors such as AML compliance, global reach, speed of verification, and industry specialization.
  3. Trial periods. Utilize any free trial periods offered by these tools to assess their fit for your business.
  4. Scalability. Choose a tool that can scale with your business growth and accommodate evolving needs.
  5. Cost considerations. Evaluate pricing structures and choose a tool that aligns with your budget while providing necessary features.

I have also prepared a few questions for your KYC software vendors that can help you avoid unexpected surprises and choose the one that fits your business needs:

  1. What documents are you working with? You may find out that the vendor accepts only a few options.
  2. How does the provider check the identity of the user? You need to understand what KYC processes exist under the hood to evaluate the results of the provider. There are three basic options: check holograms, checksums on the documents, or check in the government databases. The last one is more expensive for the provider but more precise to conquer fraud in fintech.
  3. Does the provider do KYC and AML using their own resources, or do they have partners? You may be faced with a situation where you are working with a vendor company which does nothing by itself. They are using the resources of another vendor. It may increase the cost of fraud prevention and detection strategies for you.
  4. Do they have SDK for mobiles? SDK stands for software developers kit. They can be native for IOS/Android or hybrid for React Native, Cordova, and Xamarin. It is a special set of tools and programs created for coders to build the fintech application with some predefined flow. It improves the user experience and helps the user pass through the identity verification process for the first time. Overall, if your provider has SDK — ask more about all the functionality it has.
  5. What can be customized in the SDK? It is better to know the answer to this question before you start to create the final design. You may be really disappointed when you realize that nothing can be changed in the SDK. For example, customization of the background colors, color/size of the buttons, and text labels that can be applied. Pay additional attention to the provider advertisement. You may have a “Powered by …” label in your app.
  6. Does the provider have an API for mobile and web applications? In some cases, the requirements for verification can’t be accomplished with an SDK. API stands for Application Programming Interface. The API allows you to send some requests to the vendor for verification according to your preferred user flow, but not as designed by the API.
  7. Can the API and the SDK of the same vendor be used together for the mobile application? This is another tricky question for the KYC provider. You may receive the NO answer. You’ll need to choose one or another.
  8. What are the supported devices for an SDK? Depending on the country you are going to work with, the list of the most popular (the most used by your target audience) devices can differ. You need to check that the SDK has no limitations for the list of devices.
  9. How many development environments does your vendor have? Usually, it is better to have at least two: a test environment and a production environment. A lot of providers have only one environment — production. It means that you are paying for every test check of your QA team.
  10. Does the vendor have full SDK and API documentation of a production environment? If you want to have a smooth fintech software development process, it is better to ask the vendor to provide the team of developers with complete documentation. Some of the requirements might not be so obvious to the developers, and it will make their heads spin.
  11. Can we change the fuzziness levels for the verification checks? Fuzziness is a coefficient that is used for comparison of the names. It may be from 0 to 1. Basically, this level defines if Alexander and Aleksandr are the same names.

These questions can help you integrate with external KYC providers, but I have one more solution for you. If figuring out what services you need is challenging, the DashDevs team can do it all for you.We collaborate with numerous vendors that offer KYC services. Hence, you can simply tell us what your business needs and describe your product, and we can select and integrate the best solution for you.

Implement KYC Process into Your Business

I have witnessed how startups face significant financial losses, government-related issues, and damage to reputation due to incorrect KYC integration processes. At DashDevs, we often address KYC implementation challenges for clients who may not have initially recognized the significance of this process. So, here are the tips to keep in mind while integrating KYC into your business operations.

#1. User Onboarding

Users love simple processes. Suppose you want to secure your product and insert as many protection functions as possible to take care of users’ security. But, people may find filling in all the data or completing the verification process challenging. That’s why a user-friendly onboarding process is a must. Consider the following steps:

  • Simplify registration. Streamline the registration process. Collect only essential information initially to reduce friction. If you have 3+ private questions like “What is the first horse you were riding name?”, people may feel that it’s too much information to remember. So safety is important, but simplicity is preferred more.
  • Clear instructions. Provide clear instructions to users on the KYC requirements. Make sure they understand the purpose and importance of the verification process. Add some tips and animations explaining the fraud and why it’s important.
  • Progress tracking. Implement a progress tracker to keep users informed about the status of their KYC verification. This is a great way to instill confidence in the process.

#2. Advanced Verification Techniques

Employ advanced verification techniques to enhance the accuracy and reliability of KYC identification processes. Leverage cutting-edge technologies to fortify your fraud prevention strategies:

  • Biometric verification. For heightened security, integrate biometric authentication methods, such as fingerprint, age verification or facial recognition.
  • Behavioral analytics. Utilize behavioral analytics to assess user interactions. This will help you identify anomalies and potential risks.
  • Device recognition. Implement device recognition to verify the devices’ consistency during the onboarding process. Such a KYC verification process adds an extra layer of security.

#3. User Experience Considerations

Stringent KYC processes are crucial, but striking a balance with a positive user experience is equally vital. Here are some elements to ensure a harmonious integration:

  • Clear communication. Communicate KYC requirements transparently. Highlight the benefits of the process in protecting users and the business.
  • Mobile-friendly solutions. Optimize KYC processes for mobile users. Mobile transactions are prevalent, so you should make your product as simple to transfer money as possible.
  • Educational resources. Provide educational resources or FAQs to address standard user queries about the KYC process. It can foster understanding and cooperation between the user and your business.
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KYC Vendor Integration Success Story

Our team at DashDevs collaborated on a transformative project for our client, Pi-1, an innovative modular white-label banking platform. The goal was to reshape the financial industry, offering branchless financial services that empower individuals to invest, manage, and earn more efficiently. 

The challenge: integrating seamlessly with over 30 software vendors, including crucial elements like KYC and AML.

How We Overcame Challenges

DashDevs team leveraged Pi-1’s cloud-based Banking as a Service (BaaS) platform to tackle this challenge head-on. Our team skillfully integrated best-in-class financial services into a unified API, providing end-to-end digital banking solutions. Pi-1’s white-label offerings streamlined the process, turning challenges into opportunities.

To give users a holistic view of their lifecycle data, our team combined operational data with insights from 30+ sources. This not only facilitated advanced analytics but also enhanced machine learning capabilities, elevating the platform’s overall performance.

Business Impact

While the journey had its hurdles, the results underscore the success of our collaboration:

  1. £20M funds raised. DashDevs’ expertise contributed to a £5M Seed Round and attracted an additional £10M in capital, showcasing Pi-1’s appeal to investors.
  2. 100K monthly active users. The platform, developed from the ground up by DashDevs, now boasts 50,000 Daily Active Users (DAU) across three banks, demonstrating its robust performance.
  3. £2M turnover monthly. Banks built on the Pi-1 platform, nurtured by DashDevs, collectively generate a monthly cash flow exceeding £2 million, reflecting the tangible success of our collaboration.

In summary, our partnership with Pi-1 exemplifies how overcoming challenges in vendor integration can lead to transformative outcomes.


Fraudsters are tricky. They are always trying to gain access to your system from different sides and trick your fraud prevention methods. They use different phone numbers, emails, documents, and name spellings. So, you need an additional check verifying if the user trying to register has not already been blocked in your system or state record.

KYC and AML services are just the beginning of your journey to the exciting world of fintech. Hope this article can help you secure your fintech application from fraud and cybercriminals.

Need help with KYC integration?

If you can’t find a perfect vendor or are unsure about what exact KYC procedures you need — talk to our experts and make your product secure.

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Table of contents
What is KYC in Fraud?
KYC in fraud prevention refers to Know Your Customer, or identity KYC checks, a set of procedures designed to verify the identity of clients. It is pivotal in preventing fraudulent activities by ensuring that financial institutions and businesses are well-acquainted with the individuals they engage with.
What are the three components of KYC?
KYC investigation comprises three key components: Customer Identification Program (CIP), Customer Due Diligence (CDD), and Enhanced Due Diligence (EDD). CIP involves collecting and verifying customer identification information. CDD assesses customer risk by understanding their financial activities, while EDD delves deeper into high-risk customers, obtaining additional documentation or information.
What is the KYC verification method?
KYC verification methods involve various checks to authenticate customer identities. These methods include identity checks using real documents, liveness checks through photos, videos, or live-streaming, and address proof through submitted bills. Artificial intelligence (AI), machine learning (ML), and other technologies enhance the effectiveness of these verification methods.
What does KYC checks for?
KYC checks, including KYC reporting, aim to identify and mitigate risks associated with criminal intentions in business relationships. It verifies customer identities and screens for politically exposed persons (PEP), sanctions, cyber criminals, and fraudsters. Additionally, KYC helps detect and prevent money laundering, ensuring compliance with regulatory requirements.
How does KYC align with regulations?
Know Your Customer KYC aligns with regulations by ensuring compliance with rules set by regulatory bodies worldwide. These regulations include verifying customer identity, conducting due diligence, monitoring fraudulent transactions, and promptly reporting suspicious activities to relevant authorities. Different countries have specific KYC compliance requirements.
Why is KYC important in fintech?
KYC is crucial in fintech to eliminate financial crimes such as money laundering, terrorist financing, and fraud. It provides companies with the tools to pinpoint and report suspicious activities, safeguarding against illicit behavior. Know Your Customer (KYC) is particularly vital for new financial institutions susceptible to fraud.
What are the consequences of non-compliance with KYC regulations?
Non-compliance with KYC regulations can lead to substantial fines, legal issues, and damage to a company's reputation. Regulatory bodies are stringent in implementing these rules, and adherence is essential to avoid financial losses and legal repercussions