In the fintech industry, customer onboarding ensures new clients can effectively access and use financial or banking systems. A well-structured onboarding process helps companies build trust with customers while meeting compliance requirements in highly regulated markets. Traditional onboarding and KYC methods include manual checks, which are slow and difficult to scale. Therefore, an increasing number of companies are turning to fintech software development to transform customer onboarding with automated, AI-powered identity verification and compliance checks.
In this article, we’ll explore the major roadblocks to effective customer onboarding and KYC procedures, and examine how AI-powered fintech solutions help companies overcome them. The processes of client onboarding and KYC in particular can present significant operational challenges for both customers and fintech teams, including customer support specialists and onboarding analysts.
A large number of forms during the registration process can cause customer frustration, especially if some information needs to be filled out multiple times. Additionally, no clarity around a number of steps or forms involved can further harm customer experience, resulting in abandoned sign-ups or onboarding drop-offs. While many fintech companies are heading for automation, some firms still manually check all customer documents. A large number of records to review can lead to human errors and delays in onboarding. As fraud themes become more sophisticated, legacy systems can be insufficient for detecting deceptive user actions and protecting sensitive data. In recent years, identity fraud has become a significant concern for banking organizations. In the US, the total cost of identity fraud reached $47 billion in 2024, a $4 billion increase from 2023. This puts fintech organizations at direct risk of regulatory fines and reputational damage.
AI solutions can make it easier for fintech companies to manage and prevent common challenges in the onboarding processes. According to recent statistics, AI onboarding tool implementation can reduce costs for banks by 30%-40%. An AI-powered chatbot guides customers through the whole onboarding journey and provides step-by-step instructions and real-time support. It can also answer customer questions in natural language, offering helpful tips during onboarding.
In cases where a company operates on the international market, chatbot solutions that support multiple languages help communicate with customers across all regions. If an AI-powered chatbot is unable to handle a complex query or if a customer requests human assistance, it can transfer the conversation to a human specialist, providing a detailed context of the interaction.
Companies use such technologies as AI-powered image recognition and Optical Character Recognition (OCR) to verify the authenticity of identity documents, for example for loan approval. Once a client provides all the required documents, an AI-powered system can quickly analyze the images for signs of tampering or counterfeiting. If any discrepancy is found, the system triggers an alert for human review, speeding up the overall process. AI tools can analyze customer data during the KYC process by performing in-depth checks against multiple online data sources as well as by screening companies and organizations an individual or a company is directly or indirectly associated with. This way an AI solution helps prevent money laundering and other illegal activities. Based on this data, AI-powered fintech tools can create detailed customer risk profiles, summarize key risk factors, and provide justification for risk scores.
Now, let’s examine how fintech companies are leveraging AI and the results they achieve. Remitly is a US digital financial services provider that offers fintech products for fast international payments. To improve customer support processes, the company implemented Amazon Bedrock. As a result, Remitly achieved a 25% reduction in all chats handled by AI, with only 3% of all customers requiring human assistance after interacting with AI, while also reducing response time by 75%. Airwallex is a global fintech company that has introduced a generative AI tool to improve its KYC and customer onboarding processes. AI implementation lowered false positives from high-risk keyword identification by 50%. It also increased the number of customers passing through onboarding without a human agent by 20%. The AI tool’s context understanding improved the accuracy of KYC process, which made customer onboarding faster and more efficient.
To choose the right AI tools to achieve your business goals, such as increasing the speed of request processing or onboarding more clients, you need to consider multiple factors, including the following ones; Scalability: Fintech solutions powered with AI capabilities should seamlessly handle traffic spikes, big data volumes, and a growing customer base, therefore, it is better to choose cloud-based tools or solutions designed for horizontal and vertical scaling; Regional Compliance: KYC and AML regulations differ depending on a country or region. A tool that offers robust localization capabilities will help businesses operating across different locations meet regulatory requirements
Your AI tools should be compatible with other systems of your IT environment, such as CRM software, security tools, fraud detection tools, etc., for uninterrupted data flow and enhanced operational efficiency. AI is changing how fintech companies handle customer onboarding and KYC processes. By automating tasks like identity checks, document verification, and fraud detection, companies can reduce manual work and offer a quicker and more intuitive experience for users. This lowers costs and makes customers happier from the very beginning.
As industry rules become stricter and customer expectations rise, fintech companies using secure and flexible AI tools will be better equipped to stay ahead of the competitors.
Darya Novik is a technology observer at Itransition with about five years of experience in the IT industry. She specializes in researching and analyzing emerging technology trends, focusing on their real-world applications for businesses across a wide range of industries. Novik tracks recent technological advancements and communicates their relevance to help organizations make informed technology choices that drive sustainable growth and competitive advantage.
