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Identity Verification Procedures for Digital Banks Across Asia-Pacific

Explore the rise of neobanks in the Asia-Pacific region, understand what drives their growth, and discover the Know Your Customer (KYC) regulations related to these digital banking alternatives.

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Neobanks in the APAC Region Requiring Customer Identification
Neobanks in the APAC Region Requiring Customer Identification

Identity Verification Procedures for Digital Banks Across Asia-Pacific

Rapid Growth and Challenges in the APAC Neobank Market

The Asia-Pacific (APAC) region is experiencing a surge in the neobank industry, with more than 60 neobanks currently operating in the market. This rapid expansion is expected to continue, with the APAC neobank market size estimated to reach USD 2.58 billion by 2029 [1].

One of the key drivers of this growth is the region's large number of neobank customers, with China leading the way. However, the expanding market also presents several significant challenges for neobanks [1].

Regulatory Hurdles and Compliance Costs

APAC countries have diverse regulatory frameworks, with countries like Singapore (Monetary Authority of Singapore, MAS) and Hong Kong enforcing strict KYC and AML compliance requirements. Maintaining compliance demands costly legal expertise, frequent system upgrades, staff training, and technical adjustments. Data localization mandates and jurisdictional licensing add further complexities when scaling across borders while aiming for a consistent user experience [2].

Data Quality and Fraud Detection

Data challenges in fraud detection are another significant hurdle for APAC neobanks. AI-powered fraud prevention is growing in the region, but banks struggle with fragmented and poor-quality data, leading to less effective fraud detection. Additionally, AI systems risk embedding ethical biases if training data reflect demographic or socioeconomic prejudices, threatening fairness and customer trust [3].

Identity Verification for All

Neobanks in the APAC region face challenges verifying the identities of people who aren't in existing databases, such as foreigners and immigrants. To address this, solutions like Sumsub's document-free verification solution, Non-Doc, which verifies user identities by ID number only, are gaining traction [1].

Adopting Advanced KYC/AML Technologies

APAC neobanks respond to these challenges by adopting advanced, automated KYC/AML technologies. These include digital identity verification tools, biometric authentication, automated customer due diligence, AI-driven transaction monitoring and risk scoring, and case management systems [2][4][5].

Some neobanks also leverage Banking-as-a-Service (BaaS) models to utilize the license of established banks, lowering entry barriers while integrating robust KYC/AML compliance infrastructure [2]. To counter bias risks in AI fraud detection and KYC, neobanks incorporate fairness audits and demographic balancing techniques within their AI models alongside transparent protocols [3].

Awareness and Trust

Despite the growth of the APAC neobank market, a large proportion of customers in the region are either unaware of the existence of neobanks or have no idea how they work [1]. Building awareness and trust among the population, addressing reluctance to transfer from existing institutions, and increasing consumer awareness are crucial for the continued success of APAC neobanks [1].

Industry Insights and Strategies

At the Fraud Summit 2025, industry top dogs from fintech and crypto will share insights on the new future and resilience strategies, providing valuable insights for APAC neobanks [6].

References:

[1] Deloitte (2023). Neobanks in APAC: Scaling up, scaling out. [Online] Available at: https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/finance/deloitte-neobanks-in-apac-scaling-up-scaling-out.pdf

[2] MAS (2021). Digital Full Bank Licences. [Online] Available at: https://www.mas.gov.sg/regulation/licensing/digital-full-bank-licences

[3] Deloitte (2023). Neobanks in APAC: Scaling up, scaling out. [Online] Available at: https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/finance/deloitte-neobanks-in-apac-scaling-up-scaling-out.pdf

[4] AML RightSource (2022). AML Compliance in APAC: Challenges and Opportunities. [Online] Available at: https://www.amlrightsource.com/aml-compliance-in-apac-challenges-and-opportunities/

[5] FICO (2022). Fraud Management in APAC: A Comprehensive Guide. [Online] Available at: https://www.fico.com/en/resources/whitepapers/fraud-management-in-apac-a-comprehensive-guide

[6] Fraud Summit (2025). Agenda. [Online] Available at: https://fraudsummit.com/agenda/

  1. The expansion of the APAC neobank market, driven by factors such as large customer bases, is faced with challenges in maintaining regulatory compliance, which demands costly legal expertise and frequent system upgrades.
  2. APAC neobanks grapple with data challenges in fraud detection, especially given the region's fragmented and poor-quality data, which hinders effective fraud prevention and may introduce ethical bias risks in AI systems.
  3. To increase customer awareness and trust, some APAC neobanks will share insights and strategies at industry events, such as the Fraud Summit 2025, to help address common misconceptions and inspire confidence in the digital banking landscape.

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