3 identity trends that push KYC beyond compliance

but PYMNTS Intelligence ResearchIn cooperation with Trollionotes that the way companies structure their emerging Know Your Customer (KYC), Know Your Business (KYB), and Know Your Agent (KYA) functions can impact operating costs, approval rates, and expansion opportunities at least as much as traditional loss prevention.

As a result, identity operating models are becoming strategic business choices that impact conversion, customer experience, and long-term growth.

Here are three trends that should guide your KYC efforts:

The cost of maintaining identity within a company is becoming easier to measure

Businesses that rely primarily on internal teams spend an average of $26 per consumer KYC review and $51 per KYB review. Hybrid organizations report average costs of $17 and $29, while companies that rely on third-party providers average $11 and $20. This gap persists even between companies within the same revenue range. Scale alone does not explain the difference.

Of course, identity verification is no longer an incidental event. Digital platforms are constantly attracting consumers, merchants, gig workers, suppliers and market participants. A modest difference in unit economics can translate into millions of dollars as volumes grow.

Data also complicates the assumption that spending necessarily leads to better outcomes. Internal teams incur the highest audit costs while simultaneously reporting greater operational challenges in several other categories. This raises the question of whether many organizations have optimized their investments in compliance or have simply accumulated complexity over time.

As organizations reevaluate technology budgets, KYC architecture should become a topic of discussion in the boardroom.

False positives have become a problem in customer experience

The second trend extends beyond expenditures and goes directly to revenue generation.

43% of companies running internal identity teams reported false positive friction, a much higher percentage than organizations using hybrid or outsourced approaches. These unnecessary rejections represent legitimate customers or businesses facing delays, additional reviews, or outright rejection.

Each abandoned onboarding operation incurs irrecoverable acquisition costs. Every legitimate customer who leaves during verification creates an opportunity for competitors.

The research also shows that internal teams reported improved decline rates and higher onboard friction along with higher false positive levels. These patterns suggest that compliance decisions shape switching performance.

As digital onboarding becomes the main front door to banking and payments relationships, reducing unnecessary friction can be just as valuable as spotting fraudsters.

Hybrid models open the door to new partnerships

The third trend may have broad strategic implications.

In-house teams reported a KYA incident rate of 53%, while hybrid models reported 28%, cutting that number almost in half. Although each operating model involves trade-offs, the results suggest that combining internal expertise and external capabilities may produce different performance characteristics than relying exclusively on a single approach.

This possibility comes as banks and fintech companies continue to deepen partnerships across onboarding, payments, blended finance and digital identity.

Instead of viewing third-party service providers as mere vendors, organizations can treat them as components of a broader operational architecture. Hybrid arrangements allow companies to retain governance and policy oversight while relying on specialized verification technologies, data sources, and automation that would be difficult or expensive to build independently.

Identity decisions cannot be isolated from broader business strategy. A company that chooses an operating model is simultaneously making choices about customer acquisition, hiring, technology investment, and future expansion.