The Hidden Cost of Identity Verification: Lost Customers

A new report from PYMNTS Intelligence, done with Trulioo, puts a number on something many compliance teams already suspect: the customer who gets rejected by mistake may cost more than the fraudster who gets through.

The report, "Built or Bought: How KYC/KYB Ownership Shapes Risk, Cost and Growth," finds that identity programs have a financial impact that extends well beyond fraud losses. That impact comes from legitimate customers who never finish onboarding, get incorrectly flagged as suspicious, or abandon applications after hitting too many verification hurdles.

Firms that manage know your customer (KYC) and know your business (KYB) entirely in-house report the highest levels of friction. Forty-three percent say they generate excessive false positives – legitimate customers identified as potential bad actors. Fifty-six percent report rising transaction decline rates. Sixty-two percent say excessive verification checks are creating customer friction.

Every extra document request, manual review, or erroneous rejection creates an opportunity for a prospective customer to walk away. Unlike fraud losses, which get measured and reported, these missed opportunities stay invisible. The customer who gets blocked incorrectly may simply take their business to a competitor.

Onboarding performance tells the same story. Fifty-three percent of firms using internal teams report onboarding delays, compared to 31% of firms relying on external providers. Sixty-one percent of internally managed programs report high onboarding abandonment rates, versus 41% among externally managed models.