Beyond Onboarding: The Unsolved Challenges in KYC & Compliance

Published on September 2025

Over the past decade, India’s fintech and banking ecosystem has adopted powerful tools for KYC and compliance. Existing platforms have enabled digital onboarding, document parsing, and faster decision-making for millions of customers.

But as the regulatory landscape evolves, fraudsters get smarter, and customer expectations rise, new challenges are emerging that traditional KYC stacks can’t fully solve.

1. KYC as Orchestration, Not Just APIs

Most compliance providers offer strong point solutions: eKYC, document parsing, fraud checks. But compliance teams are left stitching these pieces together into manual workflows across CRMs, audit logs, and regulator reporting.

The gap: KYC still feels like a patchwork of APIs, not a seamless, orchestrated pipeline.
The need: Workflow-first compliance that ties checks, alerts, and case management into a single stream.

2. False Positives and Smarter Fraud Patterns

Fraudsters today use synthetic identities, AI-generated documents, and subtle variations of legitimate credentials to bypass rule-based systems. Traditional KYC often flags too many “false positives,” leading to manual reviews, customer frustration, and lost revenue.

The gap: Static, rules-driven systems can’t adapt to new fraud patterns.
The need: AI-driven deduplication, similarity detection, and adaptive anomaly models that learn and evolve.

3. Explainability for Regulators

Compliance decisions can’t remain black boxes. Regulators increasingly demand auditability — the ability to show not just what decision was made, but why.

The gap: Many KYC providers give binary outputs (verified/rejected) without transparent reasoning.
The need: Regulator-friendly dashboards with traceable logs, decision rationales, and explainable AI outputs.

4. Continuous KYC, Not Just First-Time Checks

Most KYC stacks are onboarding-focused: verify once, approve, and move on. But RBI and FATF are pushing toward continuous monitoring — where a customer’s risk profile is updated dynamically as new data emerges.

The gap: KYC today stops after onboarding, leaving blind spots.
The need: Ongoing KYC monitoring with real-time alerts when user behavior or risk exposure changes.

5. Developer-First, Open, Flexible Integration

Large enterprises may afford heavy, black-box solutions, but fintechs, NBFCs, and infra startups need flexibility. They want modular, plug-and-play components that can be tailored without massive integration costs.

The gap: Current KYC platforms are closed, enterprise-heavy, and hard to customize.
The need: Workflow-first architectures where compliance feels like Lego blocks, not locked-in black boxes.

The Road Ahead

KYC is no longer just a compliance checkpoint — it’s becoming a continuous trust layer for modern finance. Solving these challenges requires a shift:

• From APIs to orchestration
• From rules to adaptive AI
• From black-boxes to explainability
• From one-time checks to continuous trust

This is where the next generation of compliance platforms will rise. At Arthashield, we believe compliance should evolve as fast as the threats and regulations around it. We’re building toward that future — more open, adaptive, and transparent.

Stay tuned as we share more on how we’re approaching these challenges