The pain of KYC in fintech

By Tim Strebkov
KYC is not just an important part of regulatory compliance – it's one of the hardest parts of an app's customer flow to get right, writes Tim Strebkov.

One of the major pains in creating an effective fintech product is complying with the ever-increasing KYC requirements and financial regulations. Tim Strebkov, Founder and Design Lead at Strebkov Design, looks at how leading industry players like Chime, Robinhood and Acorns have used UX/UI best practices to minimise the pain. 

With fintech apps constantly flooding the market, fintech app design might seem like a pretty sweet and easy job to do. But, in reality, designing a fintech app is probably one of the toughest jobs out there as it carries a number of unique challenges that can significantly impact the efficiency and adoption of the final fintech product. One such challenge is the KYC or Know Your Customer requirement that all financial services providers need to comply with.

Tim Strebkov

The pain of KYC in fintech

KYC is one of the most important regulatory and compliance factors in fintech product development. Its main goal is to protect financial institutions (FIs) by restraining potential fraudsters from accessing and exploiting the financial system. KYC, therefore, usually involves steps like establishing and validating customer identity, understanding the nature of customers’ activities and funds origin, and assessing any potential money laundering and terrorist financing risks.

In traditional banking, all these activities used to be managed manually by dedicated account managers and required customers to hand over their relevant ID and application documents in person. With the emergence of fintech and digital banking, KYC has also been gradually moving into the digital space. Although this shift has brought a wide range of benefits to users and fintech providers alike including quicker and more efficient onboarding and better user experience, several challenges remain.

Below are some of the most common KYC-related issues facing fintechs in 2022. 

The constantly rising amount of required due diligence information

Regulatory requirements are constantly changing. The amount of required due diligence information has increased exponentially over the past few years. Fintechs have managed to facilitate the processing of all this information by establishing omnichannel frameworks that use customer self-service portals for initial information and document collection or re-attestation, and leverage third-party data. However, in a recent review of financial crime controls at challenger banks in the UK, the Financial Conduct Authority identified that the majority of challengers are failing to obtain the full customer information required to determine their customer’s risk.

The missed business opportunities

According to Signicat’s latest survey, The Battle to Onboard, 68% of consumers have abandoned a financial services application in 2021, which is up from 63% in 2020. The two key reasons for doing so were the longer-than-anticipated length of the application process and the large amount of personal information required.

The lack of a uniform global KYC standard

Despite regulators’ ongoing efforts to provide sufficient guidance and support to financial players so they can stay compliant and avoid any potential prosecution, there is currently no consistent global KYC standard. This means that FIs are left to interpret the relevant AML laws and KYC regulations and develop their own compliance systems, processes and formats.

The risk of data and security breaches

The increasing adoption of new technologies like biometrics, AI and blockchain helps fintechs significantly minimise the risk of customer data breaches and leakages. However, most customers are still lacking full control over how their personal information is stored and who can access it. 

“Technology is changing the entire landscape of how KYC is performed. It is improving the CX, reducing cost, and increasing efficiency and quality while improving risk management,” Adam Meshell, EY’s KYC technology leader, says.

How UX design can remove the pain of KYC in fintech

Keeping the balance between regulatory compliance and customer experience (CX) as a fintech is no easy feat. And this is where mastering your fintech app’s UX design can really make a difference. Here are three ways UX design can help minimise the pains of KYC in fintech apps:

Split onboarding into multiple single steps – Breaking up the data collection into multiple single steps that are carefully spread out along the entire onboarding journey, with the information requested only when needed (not in advance or at once), will make the process much more bearable. Including clear, user-friendly instructions and explanations on why particular information is being requested and collected can additionally build trust and enhance the overall user experience.

A good example here is the US-based mobile banking app, Chime. Below, you can see how Chime requests only one key piece of information per screen and explicitly explains why certain personal information is being requested. To speed up the onboarding process, legal terms are also presented as links for users to click on as they desire.

Use visual graphics to reduce complexity - Presenting complex financial information visually and interactively with relevant graphics can also streamline and improve the user experience.

The US trading app Acorns has overcome the tediousness of the process by including various animations, making the overall process a bit more dynamic and interactive.

Add the right amount of friction – In most UX/UI design cases, eliminating friction is the designer’s ultimate goal. In fintech, however, a certain level of friction is often required, especially when a user’s personal finances are on the line. By adding just the right amount of friction at the right time, fintech UX designers can ensure users remain satisfied with the overall product experience whilst instilling a sense of reliability that their finances are protected against any unwanted accidents.

One of the most popular ways to minimise friction during the onboarding is to give users the option to ‘opt out’ and ‘skip’ through the process, and to be able to resume it at a later stage without needing to start again from scratch. In this way, fintechs can significantly speed up the onboarding process and reduce user dropouts whilst remaining compliant. 

A good example here is Robinhood’s app, which has tackled the speed and friction challenge by not including the configuration stage of the account as part of the onboarding process. Instead, the configuration is optional and the user can opt to configure the account later. Similar to Chime, the app also requires only one piece of information per screen.

For better or worse, KYC plays an essential role in fintech product development. But, from what we’ve seen in the examples above, applying effective UX design techniques like using dynamic visuals, splitting steps, and adding instructions can help overcome some of the major challenges of KYC in fintech.  

About the author: Tim Strebkov is the founder and design lead at Strebkov Design – a boutique fintech UX design consultancy. Over the past ten years, Strebkov Design has built an extensive portfolio of high-class digital financial products across fintech, crypto, payments, brokerage and more, and has become a synonym of UX/UI design excellence, reliability and transparency.


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