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55% of crypto companies plan to increase identity verification budget, Sumsub research finds

55% of crypto companies plan to increase identity verification budget_ Sumsub research finds

Sumsub, a global identity verification software provider, published State of Identity Verification in the Crypto Industry. This is the first-ever study of verification practices among crypto businesses, combining remote verification statistics coupled with expert insights into regulatory compliance and the future of identity verification.

For this study, Sumsub surveyed 200 crypto companies and analyzed millions of identity verification checks performed in 2021-2022. The data will help businesses understand industry verification standards and level up their user experience.

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In addition to its data-driven insights, the report also includes interviews with legal experts certified by ICA, CySec, and ACAMS, as well as crypto and fraud professionals from Sumsub, Mercuryo, and Notabene.

Key findings: identity verification practices

The data shows that almost 80% of crypto businesses use automated KYC solutions.

What kind of users are getting verified on crypto platforms? According to Sumsub’s analytics, 80% of them are men (although the gender ratio varies across countries) with an average age of 30 years old. This audience is getting younger, since the average age was 33 in 2021. The three most popular languages among crypto users are English, Portuguese and Spanish.

Compliance and budgeting for identity verification

Сrypto businesses are required to perform identity verification by law. So, it’s no surprise that, for 55% of the surveyed companies, staying compliant with AML regulations is their main verification goal.

26% of businesses indicated building trust in users and partners as a key goal in  using identity verification solutions, while just 17% of those surveyed indicated fraud protection as a primary goal.

The report also takes stock of the crypto company verification budgets. 55% of businesses spend between $1,000–$10,000, over 20% of companies spend from $10,000 to $100,000, and 6% spend over $100,000 monthly. The remaining 18% spend less than $1000 a month. Notably, more than a half of respondents (55%) plan to increase their budget for verification.

Fraud in crypto

The findings indicate that 47% of crypto businesses employing automated verification feel they have strong fraud detection; just 31% of those who manually check their users feel the same way. Accordingly, 15% of businesses using manual verification feel they have low fraud protection, while just 4% of automated solutions adopters feel the same.

In the first quarter of 2021, the most commonly forged documents were from KenyaCameroon and Iraq. In Q1 2022, the majority of forgery attempts were on ID cards and driver’s licenses issued in VietnamBangladesh, and Pakistan. The USA and Canada were also among the top ten countries in terms of forgery attempts.

The biggest challenges in identity verification

Crypto companies face different challenges depending on whether they use automated or manual verification solutions. The challenges with automated solutions are  false applicant rejections and approval rates—whereas, for manual solutions, it’s long verification time, human error, and difficulty entering new markets.

Working in a constantly shifting regulatory landscape is another big challenge. That’s why crypto businesses need to start building their compliance infrastructure ahead of time,  taking into account possible regulatory changes in the near future. In the report, Sumsub’s experts offer actionable solutions for staying ahead of the game in the world of crypto.