KYC Challenges: Common Issues + Solutions [2025 Guide]

KYC problems come in all shapes and sizes. But after working with hundreds of companies at Signzy, I spotted the five issues showing up everywhere in 2025.

Doesn’t matter if you’re a small fintech or a massive bank. Doesn’t matter what industry. These five things trip up almost everyone.

The crazy part? Most teams think their KYC challenges are unique. They’re not. We see the exact same patterns over and over.

Good news, though – once you know what to look for, these problems become way easier to spot and fix.

Some companies figure this out fast. Others struggle for years with the same issues.

The difference? Knowing which problems actually matter and which fixes actually work.

So, let me present to you the big five that probably sound very familiar.

5 Major KYC Challenges (and How to Actually Solve Them)

Let’s break down all five of them one by one.

1. Manual KYC processes burn time & budget

If I were to put today’s “digital KYC verification” in perspective, the digital part is only the collection. Someone is still there at the backend, reading docs, cross-checking details, and manually approving applications.

Simply put, many have digitized the intake but not the actual work. Customers upload documents online, and then your team opens an official portal in another tab and starts the same old manual process of matching details.

Is this fixable? Absolutely, yes!

The tech exists to automate the verification itself. There are comprehensive multi-step solutions out there, but at the base level, you can even just plug these two into your existing flow:

• OCR-based data extraction – Pulls information directly from ID documents without manual typing. No more squinting at blurry photos or retyping the same details over and over.
• Automated validation workflows – Cross-checks data against databases and flags only genuinely suspicious cases for human review. Routine applications flow through automatically.

Straightforward enough, right?

2.    Multi-jurisdiction KYC compliance creates workflow chaos

KYC rules aren’t static. What works in one state might not work in another. Add in international users or layered ID requirements, and suddenly, your onboarding flow is not clean anymore.

Your system needs to keep up without slowing everything down. And that’s where most teams struggle. Either they overcomplicate everything, or they miss a step entirely.

There are really just two ways to handle this: either hire compliance teams for every region you operate in or are expanding to or use automated technology (like Signzy) that can verify people from different nationalities and jurisdictions automatically.

3.    Document fraud detection fails against deepfakes and fake IDs

We just had a rant (yes, you were with me there 🙂) about how “digital” today’s KYC processes are, right?

But you are not safe even if you have implemented proper digital verification.

The 2025 Identity report shows a 244% increase in document fraud year-over-year. Another one reveals that over 3,65,758 identity theft cases were reported in the US alone in the first quarter of this year.

Related Resources

Adding fuel to the fire, AI gave birth to deepfakes, and now we’re dealing with fake documents that look real.

All you need is verification that’s as smart as the fraud attempts. Simple eno…? Okay, it’s not. But you can raise the bar by using technology to:

• Catch document tampering with AI: Uses AI to detect tampering, spot inconsistencies, and confirm ID formats.
• Stop deepfakes in their tracks: Confirms that the user is physically present during the verification process through biometric analysis like facial recognition and eye movement tracking that deepfakes can’t replicate.
• Verify from multiple sources: Combines document metadata analysis, biometric matching, and real-time database cross-referencing to verify identity from multiple angles.

We just asked you to fix three common challenges by saying integrate this, integrate that. But can you do so without breaking user experience? Because that’s also one of the common challenges I’ve seen. Let’s explore.

4.    KYC user experience causes customer abandonment

When users encounter confusing forms, unclear instructions, or broken mobile experiences, they tend to give up and move elsewhere. In fact, 73% of users frustratedly abandon KYC processes before they are done. That’s nearly three out of every four potential customers walking away from your application.

Do you know what the problem here is?

Most teams are so focused on ticking compliance boxes that they forget there’s an actual human on the other side of the screen.

Here’s a small list of things you can do to counter this challenge:

1. Provide instant validation and error messages
2. Break long forms into smaller digestible steps
3. Show progress indicators with time estimates
4. Add save-and-resume functionality for users
5. Test your entire flow on mobile devices first
6. Include clear photo guidelines upfront
7. Use auto-fill to reduce manual typing
8. Send immediate confirmation emails
9. Show preview before submission
10. Offer live chat during verification
11. Allow multiple upload formats
12. Test with real users monthly
13. Add helpful field tooltips

(Yes, believe me, it was small)

5.    Outdated KYC risk screening misses real-time threats

Risk databases change constantly. Your system might be checking against last month’s sanctions list while approving someone who got flagged yesterday.

Result? You’re either blocking good customers based on outdated information or missing actual bad actors because your data isn’t current.

Risk detection is very broad. If we went to discuss everything, it would take forever. I’m putting things in short for core events that create challenges:

• Your sanctions lists are weeks old → Automated OFAC and sanctions list syncing
• Fraud patterns changed, but your models didn’t → Machine learning models that update with new fraud data
• PEP database hasn’t been refreshed → Real-time PEP screening integration
• New criminal records aren’t reflected → API connections to criminal databases
• Updates happen manually once a month → Continuous data pipeline automation

This way, your risk detection stays current with the help of technology.

Countering KYC Challenges with the Right Tech

Vivid regulations, digital scams, slow onboarding, and high setup costs are among the key roadblocks that come in the way of KYC compliance. While each of these KYC challenges may seem like a separate problem, at the core of these issues is a shared problem: old systems trying to keep up with new demands.

But hey, who has the time to build an automation system from scratch?

At Signzy, our KYC solutions are built to handle these challenges. We offer solutions that bring all of this into one streamlined flow. The best part? You can plug directly into your existing systems. If not, use pre-built modules.

If you are curious how this setup could work in your case, we can walk through it together. Book your free demo today!