29/4/24, 20:26 The Business in Knowing Businesses — the emerging European KYB landscape | by Dawn Capital | Medium

The Business in Knowing Businesses — the

emerging European KYB landscape
Dawn Capital · Follow
4 min read · Dec 13, 2023

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By Owen Brooks, Dan Chaplin and Nils Howland

Know Your Customer (KYC) software has become a cornerstone of modern

compliance operations, leveraging biometrics and database checks. Know Your
Business (KYB) on the other hand still remains relatively unsolved by software. Most
KYC players have settled for outsourcing responsibility to third-party managed
services, showing some reluctance to venture into this offering. It reflects key
differences between KYC and KYB: more chaotic and varied datasets, the lack of
“finality” in the evidence, and the amount at stake if elements are left ambiguous.

Engaging with business entities presents unique fraud considerations: who is in

control, where they operate, their credit history, and how they are structured. KYB
processes have to both deliver reliably during onboarding and on an ongoing basis
as they consistently change and evolve. Failing to get this upfront onboarding and
monitoring right is a major financial, regulatory, and reputational risk. Increasingly
sophisticated fraud — for example, synthetic identities — and a more turbulent
global geopolitical environment has only made such firms’ KYB processes more
urgent and complex.

A lack of proven KYB software has resulted in companies taking a variety of

directions to try and get to a solution from outsourcing the workload to third-party
services, enduring cumbersome processes filled with back-and-forth
communication and database checks, or building internal solutions as they scale up
and internationally. If done manually, these are all vulnerable to significant human
errors as well as an inherent lack of scalability.
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29/4/24, 20:26 The Business in Knowing Businesses — the emerging European KYB landscape | by Dawn Capital | Medium

We believe unlocking this KYB opportunity will be massive: the annual impact of
global fraud now exceeds $1 trillion, according to LexisNexis. $46 billion is already
spent on financial crime compliance in the US alone. And it is only getting worse —
91 percent of financial institutions have reported increased fraud rates according to
Alloy’s Benchmark Report. Firms have been fined upwards of $100 million for
inadequate oversight of compliance risks and record-keeping errors in recent years.
And managing it successfully is a significant operational challenge — we’ve seen just
recently here in Europe, Wise pausing new business onboarding as it struggled to
cope with a significant backlog.

It’s not just a problem for financial services firms. KYB compliance extends to many
other business propositions, marketplaces being just one example. Here, checks
often need to be made on SMBs — 99 percent of all firms and 50 percent of GDP in
high-income countries. According to Alloy, 29 percent of these don’t even have a
website making this a significant headache.

Today, there is a clear opportunity for a next-generation solution to emerge.

The next generation of KYB

We’ve seen an array of emerging companies looking to rise to this challenge. These
providers are differentiating across several dimensions: the quality and flexibility of
their workflows, the depth of their analytics and risk capabilities, as well as access
and standardisation of underlying business datasets.

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29/4/24, 20:26 The Business in Knowing Businesses — the emerging European KYB landscape | by Dawn Capital | Medium

As we see it, the strength of these platforms will be in both their usability for
compliance analysts, and configurability to map to company’s individual processes,
risk frameworks and customer sets — all of which are crucial given that reaching
high levels of straight-through processing is just not possible for KYB as it is in KYC.
Compliance decisions around businesses are hardly ever, if ever, clear cut. A first
assessment will mostly deliver a set of “orange flags” that need to be reviewed.

Advanced risk detection and scoring engines are certainly one important step to
improving efficiency (reducing false positives) and lowering perpetual risk
exposure. Risk engines need to incorporate company and industry specific data and
importantly contextualise it to enable faster decision-making for analysts. We have
already seen companies emerging that solve this analytics challenge of managing
myriad sources of risk data, like Quantexa — a Dawn portfolio company with a
decision intelligence platform used for anti-fraud and analytics.

As important will be improvements in workflows for compliance analysts as KYB

decisions will almost certainly remain human-in-the-loop. Business customers
should not only have higher expectations of consumer-grade UI/UX, but also the
ability to be agile in the configuration and orchestration of their KYB solution to
their specific organisational risk frameworks and processes. Delivering fast, lower-
touch and seamless user experience to maximise customer conversions while not
trading off risk taken on (or regulatory requirements) is not easy. But it is crucial
and extremely valuable — this due diligence takes up more than 40 percent of
onboarding time for banks according to McKinsey. In turn, this may lead to
different solutions tailoring to different KYB contexts such as marketplaces, e-
commerce, supply chain management and beyond.

The European landscape

Europe is at the forefront of start-ups building in the KYB space, and we look
forward to watching the sector develop. Some of the exciting new solutions on our
radar include:

UK and Ireland: Sikoia, Condukt, Detected, and KYP

Benelux: Supplied and Fourthline

France: Dotfile and Ondorse

Nordics and Baltics: Spektr, Uniify, Strise, Avallone, and Vespia

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29/4/24, 20:26 The Business in Knowing Businesses — the emerging European KYB landscape | by Dawn Capital | Medium

DACH: Duna and Atfinity

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Iberia: Feedzai
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While KYB represents a complex and multifaceted challenge, the right solutions will
transform the compliance landscape and seize a multi-billion dollar opportunity.

We’re keen to meet the companies taking on this challenge, and to hear more about
your plans.

Please do get in touch with: [email protected] and [email protected] and

[email protected].

Vc Thoughts Know Your Business Know Your Customer B2B Technology

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