How the UK Is Tackling Identity Fraud in 2025

Identity fraud is a growing concern for businesses that rely on digital transactions. Criminals are using fake identities, stolen credentials, and AI-generated deepfakes to bypass traditional security measures.

This is costing companies millions each year in fraudulent transactions, chargebacks, and regulatory fines. Many businesses also struggle with outdated identity verification processes that are slow, difficult for customers, and easy for criminals to manipulate.

If your business is dealing with:

• High rates of fraudulent account openings and stolen credentials
• Customers abandoning sign-ups due to long and complicated verification steps
• Rising compliance pressures under KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations

Then you need a more effective way to verify user identities without frustrating real customers.

let us guide you through:

Understanding Identity Fraud and Its Impact on Businesses

How Identity Fraud Works

Identity fraud happens when criminals use stolen or fabricated personal information to gain access to financial services, create fake accounts, or conduct fraudulent transactions. In the past, this was done using stolen documents or hacked credentials, but modern fraudsters have moved to more sophisticated techniques:

• Synthetic Identities: Fraudsters combine real and fake data to create entirely new identities that bypass traditional checks.
• Deepfake Technology: AI-generated videos and images make it easier for fraudsters to impersonate real people.
• Credential Theft: Data breaches expose usernames, passwords, and personal details, which criminals then use to take over legitimate accounts.

The Cost of Identity Fraud for Businesses

Companies that fall victim to identity fraud face several risks, including:

• Financial Losses: Fraud-related chargebacks, stolen funds, and fraudulent transactions eat into revenue.
• Regulatory Fines: Failing to comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations can result in significant penalties.
• Customer Trust Issues: If fraud is detected on a platform, legitimate users may lose confidence in the service.
• Operational Costs: Manual identity verification methods require additional resources, increasing costs and slowing down customer onboarding.

Why Businesses Struggle to Stop Fraud

Many companies still rely on outdated identity verification methods that are no longer effective against modern fraud tactics. These include:

• Password-Based Authentication: Weak passwords and password reuse make accounts easy to compromise.
• Document Uploads for KYC: Fraudsters can easily manipulate or forge identity documents.
• Manual Review Processes: Slow, expensive, and often ineffective against advanced fraud techniques.

With fraud becoming more complex, businesses need a verification method that is more secure, faster, and less prone to manipulation.

Why Traditional Identity Verification is No Longer Effective

Identity fraud is becoming harder to detect as fraudsters adopt more advanced tactics. Yet, many businesses still rely on outdated verification methods that slow down real users while failing to stop criminals. These methods create unnecessary friction for legitimate customers, while fraudsters find ways to bypass them.

The Weaknesses of Traditional Identity Verification

1.Passwords and SMS One-Time Passcodes (OTPs) Are Easy to Compromise

• Data breaches have exposed billions of passwords, making credential theft one of the most common fraud tactics.
• SMS-based authentication can be intercepted through SIM swapping, allowing criminals to gain access to accounts.

2.Document Uploads Can Be Manipulated

• Scanned ID cards, passports, and utility bills can be easily forged or altered.
• Fraudsters use AI-generated deepfakes to bypass facial recognition software.

3.Manual KYC Reviews Are Slow and Expensive

• Many businesses rely on human reviewers to verify documents, which increases costs and delays the onboarding process.
• Manual verification can introduce errors, making it less reliable than automated solutions.

4.Inconsistent Data Across Verification Systems

• Many companies use multiple third-party services for verification, leading to fragmented data that is difficult to track.
• Fraudsters take advantage of these inconsistencies to create fake accounts across different platforms.

5.Fraudulent Accounts Slip Through Gaps in Traditional Verification

• Synthetic identity fraud—where criminals create fake personas using a mix of real and fake data—has become a major issue.
• Traditional checks often fail to detect these accounts because they appear legitimate on the surface.

How Fraudsters Exploit These Weaknesses

When businesses rely on outdated verification methods, they become easy targets for fraudsters. Criminals use stolen credentials, AI-generated deepfakes, and synthetic identities to open accounts, access financial services, and commit fraud.

Meanwhile, real users are often frustrated by long verification processes that require them to upload multiple documents, wait for approvals, or verify their identities through unreliable means. This leads to higher abandonment rates, with potential customers leaving before completing the onboarding process.

The Need for a Better Solution

Businesses need a faster, more secure, and more accurate way to verify user identities. Open Banking offers a solution by allowing companies to authenticate users using real financial data from their bank accounts. This eliminates the risk of fake documents, stolen credentials, or manipulated identities.

How Open Banking Provides a More Secure and Accurate Way to Verify Users

Businesses need a verification method that prevents fraud while making the process easier for legitimate customers. Open Banking solves this problem by allowing businesses to verify identities using real financial data from trusted banks instead of relying on passwords or documents that can be forged.

What is Open Banking Identity Verification?

Open Banking allows businesses to verify a person’s identity directly through their bank account. Instead of asking customers to upload documents or enter personal details manually, businesses can request secure, real-time data from the customer’s bank, ensuring that the information is accurate and up to date.

Why Open Banking is More Secure Than Traditional Methods

✅ No More Fake Documents – Identity data comes directly from banks, removing the risk of forged IDs.
✅ Prevents Stolen Credential Fraud – Bank login authentication makes it nearly impossible for fraudsters to use stolen passwords or emails.
✅ Real-Time Verification – Unlike documents that can become outdated, bank data is always current.
✅ Reduces Human Error – Automated verification eliminates mistakes that occur in manual KYC reviews.
✅ Stronger Fraud Detection – Open Banking systems analyse financial behavior to identify fraudulent activity before it happens.

Better Experience for Customers and Businesses

Businesses using Open Banking reduce onboarding friction by removing the need for multiple identity checks, document uploads, and long approval processes. Customers appreciate the simplicity, and companies benefit from a lower fraud rate and higher completion rate for sign-ups.

How Finexer’s Open Banking API Solves Identity Fraud and Compliance Challenges

Businesses need a reliable and secure way to verify identities without increasing friction for legitimate users. Finexer’s Open Banking API provides a solution that stops fraud before it happens while ensuring compliance with regulations like KYC, AML, and GDPR.

By using real-time, bank-verified identity data, Finexer eliminates the weaknesses of traditional verification methods, reducing fraud risk and speeding up the onboarding process.

How Finexer’s Open Banking API Works

1. User Selects “Verify with Bank” – Instead of uploading documents, the user verifies their identity using their bank account.
2. Secure Bank Login & Consent – The user logs into their bank through a secure connection and grants permission to share specific data.
3. Real-Time Data Retrieval – Finexer’s API retrieves the user’s verified name, address, and account details directly from the bank.
4. Instant Identity Confirmation – The system checks for inconsistencies and fraud indicators, ensuring the person is who they claim to be.
5. Regulatory Compliance Check – The verification process meets KYC, AML, and GDPR requirements, protecting businesses from legal risks.

Why Businesses Choose Finexer for Identity Verification

✅ Prevents Fraud Before It Happens

• Stops fake accounts and identity theft by verifying users through bank data rather than documents that can be forged.
• Detects high-risk users by analysing real-time financial data, reducing exposure to fraud.

✅ Meets Compliance Standards Effortlessly

• Automates KYC and AML compliance by verifying identities instantly.
• Provides digital audit trails for regulatory reporting, reducing manual compliance efforts.

✅ Improves Customer Experience & Onboarding Rates

• No need for document uploads or long verification processes.
• Faster approvals, leading to lower abandonment rates and higher conversion rates.

✅ Works with 99% of UK Banks

• Finexer’s API connects to nearly all banks in the UK, ensuring wide coverage for identity verification.

✅ Easy Integration for Businesses

• No-code and API-based solutions allow businesses to integrate Finexer’s identity verification system without complex development work.
• White-label branding ensures a consistent customer experience.

Industries That Benefit from Finexer’s Open Banking API

• FinTech & Payment Platforms – Secure onboarding and fraud prevention for financial services.
• E-commerce & Marketplaces – Reduces risk by verifying buyers and sellers.
• Cryptocurrency Exchanges – Ensures compliance with AML regulations.
• Lending & Credit Providers – Verifies borrower identities and financial history.
• RegTech & Compliance Solutions – Automates KYC and risk assessment.

With identity fraud increasing year after year, businesses need a secure, fast, and compliant way to verify users. Finexer’s Open Banking API provides exactly that.