In brief:
- Human resources being allocated to processes that can be automated, no auto-decisioning criteria, and onboarding abandonment due to excessive friction are among some of the biggest costs of manual verification
- Some banks & fintechs bound by KYB checks saved over $1M, 28,000 manual review hours, and entire full-time salaries through automating their manual identity verification process
- Automated KYB verification tools are the best way to see ROI in your verification process by automating key tasks so you can focus manual review efforts where they are needed — on high-risk decisions
Manual KYC and KYB processes are still astonishingly prevalent in many banking, lending, & fintech businesses, despite the need for digital transformation, with most customers demanding a smooth online onboarding process. Despite manual reviews and attention, business identity fraud still seems to break through fraud detection programs.
Business identity fraud is costing U.S. businesses — especially in the banking & fintech industries — a lot, especially with the rise of synthetic identity fraud. According to Regula’s report Identity Verification Investment: A Study on Its Business Impact, nearly half of all enterprises reported that identity fraud cost them more than $300,000 in 2022.
What you might not know is that when asked about the biggest costs of identity fraud, 44% of businesses claimed that “business disruption” was the biggest issue — not the bottom line expense of the fraud itself.
When fraud permeates your business or platform, the amount of manual resources that need to be allocated to dealing with those issues drive up the cost of that fraud significantly, but when the KYC process is automated, those costs go down significantly.
The goal is to find ways in your KYC process that manual tasks can be automated, so you can reduce the costs of manual identity verification. In this article, we’ll show you exactly how to do that, including covering:
- What does manual KYC / manual verification mean?
- The real costs of manual identity verification: case studies & data
- 6 things that contribute to additional identity verification costs
- Typical identity verification pricing for software & API tools
Let’s get started by identifying which elements of your identity verification process are still manual when they could be automated.
Manual KYC or manual verification refers to using manual tactics like human oversight, disconnected data sources, or a lack of digital tools in your process for conducting thorough Know Your Customer checks on the business identity verification you need to complete before onboarding a new customer.
Using legacy tools or manually checking business information databases like the IRS or SOS to perform KYB verification takes a lot of time, and it doesn’t scale with growing businesses that onboard dozens, hundreds, or even thousands of new businesses every month.
To check the business identity verification information required by KYB & KYC regulations at scale, you need access to tools that can provide the full scope of information you need to verify, and can run it through databases in seconds.
What information is needed for identity verification & how is it collected?
To perform adequate KYB/KYC checks, you would be looking to verify at least this basic business verification information:
- Business name and address
- EIN (Employer Information Number) / TIN (Tax ID Number)
- Business registration status (with SOS)
- Business is in “good standing” (with IRS)
- Business formation documents
- If there are UCC liens filed against them
- If the business has filed for bankruptcy
Depending on your industry, jurisdiction, or other regulations you might be bound by, you might also need to verify information like:
- Verify the UBOs & RCAs associated with the business
- If the business (or its associated people) are on any Watchlists, Sanctions Lists, or PEP Lists
- NAICS, SIC, or MCC codes
- Web presence, online footprint, or IP activity
- If you’re dealing with a high-volume third-party sellers (for merchants)
- The credit history of a small business you are onboarding
How is manual identity verification automated?
Manual verification automation can occur in any way that cuts down the time spent by human beings verifying specific business information by manually looking it up in databases. Typically, this is done with the help of a KYB software, which automates aspects of business identity verification.
Typically this is done in the following ways:
- A unified data source - The software has data pipelines into multiple sources so that a business verification lookup can be done in one place, rather than spread out across multiple databases
- Business verification dashboard - The tool will have an intuitive dashboard where you can enter business identity inputs (like a business name or address) to perform lookups
- Instant results - The verification results from the lookups you perform are offered to you within seconds, so you can perform instant verification
- Data is refreshed frequently - So you don’t have to manually check from another data source, especially when dealing with new small businesses with thin files
- Offers comprehensive business identity information (based on your needs) - When entering a business name or address, you can also verify information like EIN/TIN, Watchlist or PEP hits, credit risk, or the other information you need
- Has API capabilities - Allows you the ability to set up an API for your lookups when you deal with a very high volume of applications (10,000+/month)
- Periodic checks - Allows you to set up alerts or ongoing monitoring to check if something in the status of the business you onboarded has changed, to detect fraud or risk to your business after onboarding
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Without the use of a KYB tool, these checks are all done manually, which means they require human resources allocated to them, and the costs to your business associated with that are often hard to quantify.
These examples of real companies operating in the KYB space show the true cost of using manual processes, compared to utilizing KYB automation tools.
50% auto-approval gained on 10,000+ applications per month
Novo is a leading fintech aiming to revolutionize small business banking by offering banking, invoicing, and money management in a single integrated solution. With manual reviews clogging up their application process, they were struggling to grow. Integrating Middesk’s KYB automation tool, they were able to process over 10,000 applications per month with an auto-approval rate over 50%.
This had a huge impact on their operational efficiency, automating the KYB aspects of the onboarding process, meaning manual efforts could now be allocated strictly to high-risk applications.
Read the case study on Novo+Middesk here.
Checkr’s ongoing customer support savings of over $100k+
As Checkr, a hiring and background check platform, onboarded businesses, they discovered that the data they needed to check that businesses were legitimate were spread across thousands of disconnected government portals. Even when a business was registered, the data Checkr collected from their commercial customers wasn’t always matching the business registration data exactly — which meant manual reviews were involved.
Checkr tried using a vendor with incomplete and unreliable data, and then began planning out how to build something themselves, estimating months of engineering and implementation time, testing, maintaining and updating the data, and setting up auto-decision rules. Their customer support team was also wasting most of their time on these manual reviews, rather than actually providing dedicated customer support.
Did you know?
Checkr instead turned to Middesk, utilizing their complete data on 100% of registered U.S. businesses, and using their Policies tool to set up auto-decisioning criteria for onboarding.
According to Mike Spolarich, Software Engineer at Checkr’s estimate, using Middesk over their manual processes saved Checkr at least a month of engineering and implementation time, as well as hundreds of thousands of dollars in ongoing customer support hours.
Read the full case study on Checkr here.
Investment company saved $1M+ and 28,000 manual review hours
One of Socure’s investment company customers found itself staring down the barrel of 700,000 unreviewed PEP alerts, which they estimated would require 28,000 consultant hours at $50/hour to get through (that’s $1.4M!). Rather than working through the PEP risk assessment with manual identity verification for each PEP alert, they used Socure’s KYC solution.
By setting up better criteria to identify false positives and actually detect real risks, the 700,000 alerts shrunk down to only 14,000 potential matches, and the 28,000 consultant hours went down to only 571. That $1M price tag plummeted to just over $28,000.
Read the full case study from Socure here.
Affiniti’s saves 1250 hours of analyst time on manual reviews per year
Affiniti was struggling with processing applications for their all-in-one financial operating system for small businesses, because many small businesses don’t appear in legacy system datasets. This led to a manual identity verification step for each customer during onboarding. By using Middesk, Affinity reduced their application processing times dramatically.
Affiniti estimates that they save 1250 hours of manual analyst review time per year, while still maintaining a flawless track record of 0 bad actors onboarded. Ensuring that their platform remains entirely fraud-free is very important to Affinity, keeping the integrity of the service they offer to their clients, and steering clear of common types of fraud committed on small business platforms like synthetic identity fraud.
Read Affinity’s case study here.
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IncredibleBank’s 90% reduction in manual reviews + 2 full-timers saved
IncredibleBank’s decision-making on applications averaged two days due to manual verification. They leveraged only a single data source, and the process was 100% manual.
When they implemented Alloy, IncredibleBank was able to:
- Automate 90% of applications received
- Reduce new account approval times by 88%
- Reallocate an entire full-time employee on application reviews to sales
- The employee managing fraud onboarding spends only 25% of their time on reviews and 75% on business growth instead
Read IncredibleBank’s full story.
Did you know?
According to Regula’s study, 80% of financial services and tech businesses report that they’re dealing with more foreign document verification, with 44% seeing as high as a 25-percent increase. And 62% of these businesses report handling these cases in manual ways that take a lot of time.
The use of a business verification API would really cut down time on these manual tasks, looking for business verification documents automatically for all the businesses you are trying to onboard.
If you’re looking to make changes to automate your identity verification process, these are some of the biggest contributors that are increasing your identity verification costs.
1. Human resources allocated to processes that can be automated
It might not have been your original intention, but it’s very common that either you end up with entire full-timers working on manual identity verification for your applications, or that your employees working on customer onboarding end up spending huge percentages of their work time doing this.
The monthly cost of a tool that can automatically verify business identity information can save you multiple full-time salaries, or have you re-allocate your employees time to business growth and other critical tasks. It is very likely that the costs of this tool would be lower than the cost of the full-time employees conducting these manual checks.
Check out Middesk’s product demo of their Verify tool to learn exactly how you could cut down this kind of human resource allocation to your identity verification process:
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2. No auto-decisioning criteria built into the KYB process
Building an auto-decisioning framework into your onboarding process works by setting up specific criteria that you consider would indicate that the business is legitimate, and shows that they aren’t setting off any red flags that might be an indicator of fraud. For example, a criteria might be that the business name, business address, and EIN/TIN all match what was provided to you, and that their SOS status business registration status is active.
This approach both stops false flags and helps move legitimate businesses through the onboarding flow faster, and it catches fraud and potential risks right at the top of the funnel so you can move them into a segmented onboarding flow that utilizes manual reviews when they are needed to deal with higher-risk cases.
To achieve this, you would need the use of a tool like Middesk’s Policies, which allows you to set up compliance onboarding requirements across the key inputs that matter to you (like business name, address, EIN/TIN, Watchlist, etc.). If the business meets your risk-based criteria, they are automatically approved. If not, you are alerted to why, and can move that customer into a different onboarding flow that helps you conduct further EDD (Enhanced Due Diligence).
3. Onboarding abandonment due to excessive friction
Not every cost of manual verification comes strictly from human hours. A big cost to your business could be the number of potential customers who are abandoning your onboarding process.
When legitimate businesses need to provide a lot of excessive information that doesn’t pertain to them, they are likely to jump off early and go with something a little easier — they may even think that your business isn’t right for them because of the significant level of checks you’re trying to perform.
Review your onboarding abandonment analytics and try to identify at what step customers are dropping off. If it is somewhere in a multi-step identification process that requires a lot of paperwork and document submission, it’s likely you need to reduce the number of steps here, and remove things that you can look up yourself automatically, without just removing all barriers together, opening the door up to fraud.
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4. Unnecessary due diligence over top of funnel fraud detection
A big issue in many verification processes is that you expect all of your customers to go through the same onboarding flow, even though their risk levels are completely different. This generally leads to 2 big issues:
- High-risk businesses go through the same checks as low-risk businesses, making it easier for fraud to permeate checks and get onto your platform
- You waste manual verification time performing due diligence for customers that are not a high-risk for fraud
A flow like this detects risk at the top of the funnel so you can segment your customers into the risk-based flow only when it’s needed, and auto-approve applications that don’t need EDD. A tool like Middesk Signal can detect illegitimate businesses with only 2 inputs — business name and address — and then provide a comprehensive and instant risk score for the business.
5. Working with stale data
Business identity verification checks require looking through databases like the SOS or IRS to determine if the business is legitimate. When the data pipeline you are using for these checks isn’t frequently refreshed, you’ll end up with inaccurate information.
Especially when working with newer businesses, it might appear like that business is not registered with the SOS, but they might have done so within the past couple of weeks. Working with fresh data ensures that you don’t reject legitimate businesses, and that you don’t continue to work with high-risk businesses that have recently filed for bankruptcy or had liens filed against them.
Did you know?
Middesk has some of the freshest and most complete business verification data, with data on 100% of all registered businesses in the U.S., with 92% of business registration data updated within the last 10 days.
6. Human error on compliance-based tasks that come with hefty fines
When human beings are the ones performing manual identity verification on tasks that are bound by strict compliance rules, you’re more prone to errors getting through than when the checks are performed automatically and on a regular cadence with business verification tools.
The types of fines that come along with violating the Bank Secrecy Act (BSA) or the INFORM Consumers Act can be in the millions for financial institutions. You don’t want to leave these kinds of checks open to human error, and instead allocate the human oversight where KYB tools can’t help — evaluating high-risk profiles and conducting EDD.
Business identity verification tools range so drastically in their costs, from as little as a few cents per specific data input lookup, all the way to thousands of dollars per month for enterprise-level custom subscription plans. Pricing is typically based on access to data, and the number of features the tool has.
This makes it very difficult to predict what it would cost your business to use a tool like this, and what you might save in manual process costs by doing so. We’ll break it down in more detail here to help you identify what those manual verification cost savings might be based on your needs.
4 common business identity verification pricing plans and structures
These are some typical pricing plan structures that business verification tools would follow:
1. Cost per data input
How this plan works: These plans charge you a base fee (of usually a few cents) per data input you run through their lookup tool.
What this plan typically costs: $0.05-0.99 per data input lookup.
Pros of this plan: You only pay for what you use, and implementation is usually simple because it wouldn’t require setting up a complicated tool, or much compliance team training.
Cons of this plan: Though that might sound good at first, these plans are better for very small businesses or one-off types of lookups. They are generally not sustainable for businesses that perform hundreds or thousands of lookups each month. They also require more manual work to look up each input item individually.
2. Small business plans
How this plan works: These plans are directed towards very new or growing businesses just entering the regulatory compliance space without a lot of customers to onboard. They will typically offer a less complex tool or access to just the base tool features of a more complex tool, keeping it focused on just a specific type of identity verification you might need. Think of just a bankruptcy database, or a tool that only verifies a business name and address you enter.
What this plan typically costs: Less than $100 per seat per month
Pros of this plan: On these plans, you will typically see a slightly smaller price tag, and in general, they are easier to set up and implement because they don’t have comprehensive enough features to require a lot of training and implementation.
Cons of this plan: The smaller price tag does come with some drawbacks though, as this is due to how restrictive they can be. They often do any combination of limiting you to a single seat, only offering access to a singular data pipeline, or limiting how many lookups you can do each month to a very small amount.
3. Tiered-subscription levels for scaling businesses
How this plan works: This is the most common type of pricing plan, and most quality business verification tools will offer this type of plan so you can choose the amount of support you need, as well as the add-ons that help your specific business. The tool is usually broken down into tiers with access to different features so you can choose the one you need. You may also pay for “add-on” features so that you only pay for what you’re using.
What this plan typically costs: $100-$999 per seat per month
Pros of this plan: Typically you are only paying for what you need, while also having access to other features that will help you as you scale or offer more products to your customers. These tools also often offer access to multiple data pipelines, and can perform much more comprehensive KYB checks.
Cons of this plan: These plans might not have all the custom features you need if you operate at an Enterprise level, or you might be paying for some more complicated features you don’t need if you are a very small business.
4. Enterprise / custom plans
How this plan works: You would need to work with the sales and implementation teams to determine exactly what custom features you need, and they will set up and build these for you, offering you custom pricing based on the work required to do that.
What this plan typically costs: $1000+ per month
Pros of this plan: You get a custom-built tool with the exact features you need, and generally no limitations on your usage, including seats, volume or lookups, access to data, or anything else typically restricted by other pricing plans.
Cons of this plan: The price tag: this will by far be the most expensive plan type, and is really only suited for very large businesses conducting tens of thousands of onboarding decisioning tasks each month.
Warning
You should be wary of any tool that offers ‘excessively cheap’ pricing option for you, as the access to data required to actually perform adequate compliance and eliminate fraud would not be offered for an extremely cheap price. This might be an indication that the data is not complete or is not refreshed often enough for you to be able to trust it to make onboarding decisions.
To determine whether business identity verification tool is worthwhile for you, you can simply check the pricing of the tools that fit your needs, and then compare them to what you will save by cutting out the manual processes you are performing now, as well as what you might gain, like more applications processed, less onboarding abandonment, more auto-approvals, and so on.
Here’s a detailed breakdown of the factors that generally increase the cost of a business identity verification tool that automates manual identity verification.
What adds additional cost to identity verification pricing for tools?
These are the things that typically increase your costs of an identity verification tool:
- Seats and users - Many plans charge based on how many people on your team need access, paying for a “seat” each month. The more people that need access, the more you will typically pay.
- Volume of identity checks - How many lookups you need to input each month will sometimes affect the costs, either paying per lookup, by limiting how many you can do with your plan, or by charging you extra fees if you go over your limits.
- Operational jurisdiction & industry-based compliance regulations - Where you are located and need data from can really affect your costs, especially when it comes to the features required to conduct the specific compliance checks you need to do within your jurisdiction.
- Access to data pipelines - Access to international and global business registries will typically cost more than access to U.S. only business registries for example.
- Niche add-ons - Any features that are specific to what you’re doing, or custom builds you might need will generally increase the price tag of your tool.
How to evaluate an automated identity verification tool
When choosing a tool, price is certainly a factor, but it should not be your only consideration. If you’re looking for a business verification automation tool that can get rid of your manual identity verification costs, you want to check that your tool has these key capabilities:
Business identity information it can verify
- Business name and address - To weed out top-of-funnel fraud immediately
- TIN / EIN verification & SOS registration status - To make sure the business you onboard is legitimately registered with the SOS and is in good standing
- Watchlists, Sanctions Lists, & PEP lists - To make sure you aren’t tagged with hefty compliance fines for working with people or businesses likely to commit fraud
- Bankruptcy, UCC liens, & litigations - Check the business does not pose a financial risk to you by onboarding them when they are in the midst of a financial crisis
- NAICS, SIC, & MCC Codes - Ensure you aren’t working with prohibited businesses
Data sources it includes
- Complete data - Should provide coverage on 100% of registered businesses in all jurisdictions you need
- Fresh data - Data should be refreshed on a regular cadence, and more than monthly so you can act quickly
- Authoritative data - Has access to key sources like the IRS, SOS, or other government and primary data sources that can verify the business information you input
- Alternative data - Can also check other data sources like web presence, online footprint, and media coverage to offer other indicators of risk that authoritative sources can’t offer
Automation capabilities it has
- Risk scoring to eliminate top-funnel fraudsters - Identify fraud with the earliest indicators at the top of the funnel so you don’t continue to move bad actors through the onboarding process, and waste critical time verifying them
- Can set up auto-approvals - The ability to set up your own decision-making framework that can automatically approve legitimate businesses quickly without additional manual oversight
- API capabilities - If you conduct thousands of lookups each month, the ability to automate this through an API to save even more time than using a dashboard-based tool
- Ongoing monitoring & alerts - Can automatically detect and alert you to potential fraud and risk threats even after onboarding, so you can still act quickly when necessary to get fraud off your platform
Manual identity verification costs you in dollars, human resources, lost business, and potential fraud permeating your platform. Don’t let manual verification be the reason your thriving business can’t scale.
Contact Middesk’s sales team today to set up a personalized demo for your exact use case, and start calculating exactly what automating your KYB process with Middesk is going to save you.
