Crypto is the biggest wave in fintech, yet identity verification underwhelms
Mobile authentication pioneer Incognia announced the publication of the Incognia Crypto Mobile App Friction Report – Onboarding, the first of 2022, which highlights results from their most recent study focusing on the onboarding of new users and the level of friction introduced for identity verification on crypto apps including 14 exchanges and 5 wallet apps. The study was conducted to better understand the friction users face when opening new accounts on mobile apps designed for the crypto community and also the fraud detection processes in place to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. The report includes a review of 19 of the leading crypto exchanges and wallets from major apps including Paypal, Venmo, Binance US, Coinbase Wallet, Crypto.com, Robinhood, Cash App, Blockchain Wallet, BitMart, Voyager, and more.
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As Gen Z and the digitally native generation are coming of age, investments and payments are increasingly becoming mobile and use of crypto apps is rising rapidly. In parallel, crypto fraud is also increasing with cryptocurrency-related crime growing 79% in 2021, making identity verification and authentication for crypto apps critical to curb fraud. In Incognia’s recent crypto study, 17 of the 19 mobile apps tested, onboarded users 100% through the mobile app – with only 2 apps requiring mobile and web for onboarding. Of the 14 exchanges reviewed in the study, 9 require users to input address information as part of KYC, yet only 4 of the apps required the user to upload their driver’s license and none of the apps called for any other type of address verification as proof i.e. a utility bill.
Users are rapidly adopting mobile crypto apps and yet fraud prevention and security measures are weak, outdated, and not keeping up with fraud. 9 of the 14 exchanges still rely on one-time passwords (OTP) via SMS for multi-factor authentication (MFA), which has been designated as a restricted form of MFA by NIST because of security concerns. While 10 of the 14 exchanges require address information, none are using location technology to automatically verify addresses. Only half of apps tested, 9 out of the 19, currently require legal name, date of birth, and SSN for identity verification.
“As crypto rises to meet the needs of a digital-native generation, security measures must also evolve to protect against rising fraud,” said André Ferraz, founder and CEO of Incognia. “Stronger identity verification and authentication processes are needed on crypto apps to protect users’ financial investments. It shouldn’t be a choice between friction or fraud.”
Key findings from the report include:
- Lowest Onboarding Friction: Coinbase Wallet had the overall lowest onboarding friction index. Webull was the exchange with the lowest onboarding friction index.
- 1 minute and 53 seconds: Average amount of time needed to complete the onboarding. Enjin required the least time to onboard an account at 37 seconds.
- 11 screens: Average number of screens required to complete onboarding. Trust, SoFi, and BitMart tied for the lowest number at 5 screens.
- 7 fields: Average number of fields required to complete the onboarding process. Trust had the lowest number at 0 fields.
- 10 out of 14: Exchanges require users to input address information as part of KYC.
- 9 out of 14: Exchanges relied on OTP via SMS for MFA during the onboarding process. 4 apps supported magiclink, OTP via email, and biometric authentication as an alternative MFA.
- 2 out of 19: Apps require location permission, but only after the onboarding process. No location permission was requested for security and fraud prevention purposes.
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