Blab Tech
Internal Identity Teams Cost More, Generate More Friction - Hybrid Models Offer Cost and Efficiency Gains, Says PYMNTS-Trulioo Study
A joint study by PYMNTS Intelligence and identity‑verification provider Trulioo has thrown a spotlight on how companies structure their know‑your‑customer (KYC), know‑your‑business (KYB) and emerging know‑your‑agent (KYA) functions. The research, titled Built or Bought: How KYC/KYB Ownership Shapes Risk, Cost and Growth, surveyed firms across a range of revenue bands and found that the chosen operating model can have a measurable impact on operating costs, approval rates and growth prospects.
The study’s most striking numbers come from a cost comparison. Firms that rely exclusively on internal teams pay an average of $26 per consumer KYC review and $51 per KYB review. Hybrid organisations—those that blend in‑house staff with external providers—bring those figures down to $17 and $29, respectively. Companies that outsource the entire process report the lowest costs at $11 for KYC and $20 for KYB. The gap persists even when firms of similar size are compared, indicating that scale alone does not explain the difference.
Cost is only part of the story. The research also highlights higher operational friction for internal teams. Forty‑three percent of firms with in‑house identity teams report false‑positive friction—legitimate customers or businesses are flagged, delayed, or rejected. Hybrid and fully external models see lower rates of false positives, underscoring the importance of a smoother onboarding experience. The authors point out that each abandoned onboarding process carries unrecoverable acquisition costs and that every legitimate customer who leaves during verification creates a potential opening for competitors.
The study examined KYA incident rates, a metric that captures how often identity verification processes fail to confirm the legitimacy of agents such as gig workers or marketplace intermediaries. Internal teams reported a 53% KYA incident rate, while hybrid models reported 28%, nearly halving the figure. The authors suggest that combining internal expertise with external verification capabilities can produce different performance characteristics than relying exclusively on one approach.
Identity verification is no longer a one‑time event. Digital platforms continuously onboard consumers, merchants, gig workers, suppliers and other participants. Even modest differences in unit economics can translate into millions of dollars as volumes grow. The study therefore argues that identity operating models are becoming strategic business choices that influence conversion, customer experience and long‑term growth.
The findings challenge the traditional view that spending more on compliance automatically yields better outcomes. Internal teams carry the highest review costs while simultaneously reporting greater operational challenges in several other categories. The research raises questions about whether many organisations have optimised their compliance investments or simply accumulated complexity over time.
The report’s authors note that as institutions reassess technology budgets, KYC architecture should become a boardroom discussion. Hybrid arrangements allow firms to retain governance and policy oversight while drawing on specialised verification technologies, data sources and automation that would be difficult or expensive to build independently.
In short, the PYMNTS‑Trulioo study shows that identity verification is not a cost centre alone; it is a strategic lever that can shape customer acquisition, staffing, technology investment and expansion plans. Companies choosing an operating model are making decisions that affect not only compliance and fraud prevention but also revenue generation and competitive positioning.
The research is part of a broader effort to quantify the financial impact of identity programmes beyond fraud losses. While the study does not provide specific regulatory or legal outcomes, it underscores the importance of aligning identity verification strategy with broader business objectives.
As digital onboarding continues to serve as the primary front door for banking, payments and fintech relationships, reducing unnecessary friction may prove as valuable as detecting fraudsters. The study’s data suggest that hybrid identity models can deliver cost savings, lower false‑positive rates and fewer KYA incidents, offering firms a more balanced approach to identity verification.
The PYMNTS‑Trulioo report is available for download on the PYMNTS website and includes detailed methodology, data tables and case studies that illustrate how different operating models perform across various industries.
The study’s most striking numbers come from a cost comparison. Firms that rely exclusively on internal teams pay an average of $26 per consumer KYC review and $51 per KYB review. Hybrid organisations—those that blend in‑house staff with external providers—bring those figures down to $17 and $29, respectively. Companies that outsource the entire process report the lowest costs at $11 for KYC and $20 for KYB. The gap persists even when firms of similar size are compared, indicating that scale alone does not explain the difference.
Cost is only part of the story. The research also highlights higher operational friction for internal teams. Forty‑three percent of firms with in‑house identity teams report false‑positive friction—legitimate customers or businesses are flagged, delayed, or rejected. Hybrid and fully external models see lower rates of false positives, underscoring the importance of a smoother onboarding experience. The authors point out that each abandoned onboarding process carries unrecoverable acquisition costs and that every legitimate customer who leaves during verification creates a potential opening for competitors.
The study examined KYA incident rates, a metric that captures how often identity verification processes fail to confirm the legitimacy of agents such as gig workers or marketplace intermediaries. Internal teams reported a 53% KYA incident rate, while hybrid models reported 28%, nearly halving the figure. The authors suggest that combining internal expertise with external verification capabilities can produce different performance characteristics than relying exclusively on one approach.
Identity verification is no longer a one‑time event. Digital platforms continuously onboard consumers, merchants, gig workers, suppliers and other participants. Even modest differences in unit economics can translate into millions of dollars as volumes grow. The study therefore argues that identity operating models are becoming strategic business choices that influence conversion, customer experience and long‑term growth.
The findings challenge the traditional view that spending more on compliance automatically yields better outcomes. Internal teams carry the highest review costs while simultaneously reporting greater operational challenges in several other categories. The research raises questions about whether many organisations have optimised their compliance investments or simply accumulated complexity over time.
The report’s authors note that as institutions reassess technology budgets, KYC architecture should become a boardroom discussion. Hybrid arrangements allow firms to retain governance and policy oversight while drawing on specialised verification technologies, data sources and automation that would be difficult or expensive to build independently.
In short, the PYMNTS‑Trulioo study shows that identity verification is not a cost centre alone; it is a strategic lever that can shape customer acquisition, staffing, technology investment and expansion plans. Companies choosing an operating model are making decisions that affect not only compliance and fraud prevention but also revenue generation and competitive positioning.
The research is part of a broader effort to quantify the financial impact of identity programmes beyond fraud losses. While the study does not provide specific regulatory or legal outcomes, it underscores the importance of aligning identity verification strategy with broader business objectives.
As digital onboarding continues to serve as the primary front door for banking, payments and fintech relationships, reducing unnecessary friction may prove as valuable as detecting fraudsters. The study’s data suggest that hybrid identity models can deliver cost savings, lower false‑positive rates and fewer KYA incidents, offering firms a more balanced approach to identity verification.
The PYMNTS‑Trulioo report is available for download on the PYMNTS website and includes detailed methodology, data tables and case studies that illustrate how different operating models perform across various industries.
