Balancing regulation and customer experience in Europe

Our latest article gives you a quick overview of the european eKYC space and what solutions offer the best user experience.

Understanding the eKYC mix in Europe

The digital banking revolution in Europe has ushered in a new way for banks and fintech to acquire new customers to create an end-to-end good user experience. As new digital experiences removed customer pain points from sending, saving, and investing money, customers soon became accustomed to frictionless digital banking journeys. In addition to maintaining a frictionless customer experience when it comes to KYC, banks and fintechs must also adhere to and navigate the sometimes disparate national and EU AML regulations while using the latest and most flexible technologies that fit within their tech stack. Fortunately, several eKYC solutions, such as bank identity, AI-based identity, and agent-based identity, offer a superior user experience, adhere to regulation, and utilize future-proof technologies. Read more: Why the future of KYC belongs to eKYC

eKYC in Europe: What to consider

Approaching KYC in Europe requires a range of considerations. The first core lens, regulation, requires banks and fintechs to focus on a national and EU level. While the EU level serves more of a “one size fits all model,” AML requirements at the national level vary. For example, in the UK, banks and fintechs can use automated solutions to perform an eKYC, but in Germany, the regulator requires a video-based solution for eKYC. At the EU level, banks and fintechs must adhere to AMLD5 and AMLD6.

AMLD5 came into force in the EU in 2018, and required all EU member states to transcribe the directive into their own legislation by the 10th of January 2020. This direct expands the scope of AML requirements and aims to streamline the AML procedure across member states. 

Another core consideration is if the customer already has an existing banking relationship. Customers applying for their first financial product in a country often require a branch visit. But, customers who have a current banking relationship can avail of quicker onboarding services, such as MobileID in Sweden or ID confirmation via the current banking account number in Spain. 

How can a bank or fintech offer a compliant, superb user experience onboarding?

Understanding the many lenses of the customer or user experience is critical when assessing the right eKYC in digital financial services. A good user experience is characterized by several factors and attributes such as efficiency, visible and relevant help and support, error prevention, and consistency. Within Europe, a number of eKYC options are available that not only adhere to local and regional regulations, but allow banks and fintechs to offer a superior onboarding user experience. 

The most common type of eKYC, which provides a high level of usability, is agent-based authentication. This type of authentication, either run in-house or via specialized eKYC companies, sees the applicant speak to a qualified agent who completes the identity and document check. From a user experience perspective, it offers an incredibly high amount of convenience, as applicants can typically undertake the agent-based video call at a time that is convenient for them. This solution is increasingly popular and relevant as new customer segments feel more comfortable with digital banking and completing tasks in digital channels that were once only available in the physical world before Covid-19. 

One solution with high potential in Europe is using existing bank account identification to fulfill eKYC requirements. The solution leverages an applicant’s existing bank account details and identity, backed by open banking technology. To complete the three-step process, a customer presents a valid ID, completes a micro-transfer money transfer within the existing online banking platform, and lastly confirms their details. The bank account identity solution is an efficient process, provides little room for error, and provides a high level of consistency. The entire experience can occur within one or two applications. 

AI-based identification often combines machine learning, AI, NFC, and biometric capabilities to provide a highly accurate and quick eKYC solution. This type of identification is often the quickest to complete, and is future-proof as the solution is able to evolve based on millions of datapoints feeding the algorithms. AI-based identification is a great solution for banks or fintechs already employing AI or data-driven products and experiences because it provides a high level of brand and usability consistency. 

Finding the right balance in between UX & banking regulations

The digital financial service space is growing more competitive by the day, and offering customers a seamless, innovative and relevant user experience is quickly becoming a hygiene factor. While designers and product owners are inspired by the user experience of non-regulated tech companies, such as Spotify or Netflix, banks and fintechs must ensure they abide by not only national, but regional regulation around AML. AML requirements, specifically KYC and customer identification have historically been a cumbersome, manual and time consuming process in physical and digital onboarding and therefore risk disrupting what an otherwise exceptional user experience is. 

However, a range of eKYC options, including AI-verification, bank account verification, and agent verification are becoming increasingly utilized across Europe to fulfill AML requirements, but offer seamless onboarding, with innovative solutions that align with forward-thinking brands. These solutions prove to be a win-win-win; for the bank or fintech, for the customer, and for keeping the financial services industry a safer place. 

Read on in our next article on how to offer the best customer experience whilst maintaining security and trust.


Meaghan Johnson

Meaghan Johnson
CX & UX Consultant for fintech and digital banking
Connect with Meaghan on LinkedIn


Let's talk!