Market Overview

Traditionally, identity (ID) verification through a bank teller or mail has been mandatory under the Act on the Prevention of Transfer of Criminal Proceeds in financial institutions. Additionally, revisions to the Act allow for online ID verification, with all procedures completed digitally. An increasing number of financial institutions, including all city banks and some local banks (accounting for 60% of all banks), are implementing eKYC solutions.

As the next stage, the proliferation of ID verifications is underway among companies that are not necessarily required to perform them. Specifically, providers of services that connect people and things, such as flea market sites, matching apps, and skill-sharing services, are implementing these solutions. The backdrop behind it is stricter ID verification in business matching apps, which aim to ensure reliable business partners and to enhance service security.

As a result, the market size for eKYC (electronic Know Your Customer) solutions, public personal authentication solutions, and identity verification solutions in Japan increased to 8,993 million yen, which is 130% larger than the previous year.

Noteworthy Topics

Changes in ID Verification Methods

There are various methods of identity verification, and the methods in use are shifting. When eKYC was first introduced, My Number Cards were not widely used, and many people could not remember the code number that they had provided when obtaining their driver's license. Therefore, the most popular eKYC method was submitting a photo of an ID-verifying page of a document, such as a passport or driver's license, as well as a photo of the individual. This method remains the most common, but is expected to decrease over time, because it requires a visual inspection, which is inefficient. Additionally, this method of taking a photo of an ID document for submission makes it easy to falsify an ID, which leads to an increase in fraud.  

Consequently, IC-chip reading methods are required. The market became excited when the Digital Agency announced at the 4th Council for the Promotion of a Digital Society that it would allow only public personal authentication for eKYC and revise the Act on the Prevention of Transfer of Criminal Proceeds and the Mobile Phone Improper Use Prevention Act accordingly. Although the agency has not disclosed a specific roadmap for integrating eKYC with public personal authentication, the revisions are final, prompting eKYC vendors to adapt. While integration is limited to industries that require ID verification under these acts, the significance of public personal authentication has increased. 

Future Outlook

The domestic market for eKYC (electronic Know Your Customer) solutions, public personal authentication solutions, and identity verification solutions is expected to reach 24,791 million yen by FY2027.

The market is expected to grow steadily, as these solutions continue to be implemented in financial institutions and in the areas where these regulations are not applied, such as matching apps and sharing services.

Research Outline