How the Digital Wallet Will Replace KYC – Jarek Sygitowicz

Episode Overview

Jarek Sygitowicz is the co-founder and CEO of Authologic, a pioneering company at the forefront of digital identity verification. Authologic’s mission is to simplify and modernize the often-complex landscape of identity verification to enhance security and ease of use. As the digital age progresses, the global rollout of digital IDs and the increasing risk of fraud, largely driven by advancements in AI, have placed a renewed focus on the importance of robust yet user-friendly authentication systems.

Recognizing the growing need for seamless, secure, and compliant identity verification solutions, Jarek has championed the development of identity wallets as the key to the future of digital authentication. These wallets integrate multiple forms of identity verification—ranging from biometrics and bank authentication to government-issued IDs—to offer a single, unified solution. By leveraging one API, Authologic connects to a wide array of identity verification sources, enabling businesses and institutions to easily manage Know Your Customer (KYC) and Anti-Money Laundering (AML) processes across multiple regions.

Under Jarek’s leadership, Authologic has been a key enabler of businesses transitioning to more secure, compliant, and streamlined digital identity practices. By eliminating the need for fragmented, manual processes, the company is helping organizations enhance user experiences while maintaining the highest standards of compliance. Jarek emphasizes the importance of a balanced approach to verification—one that upholds compliance with global standards but is also intuitive and non-intrusive for users. This vision drives Authologic’s commitment to making identity verification simple, accessible, and, most importantly, trustworthy for businesses and consumers alike.

Jarek’s expertise in the field is underscored by his deep understanding of the complexities of identity verification across different sectors, including financial services, healthcare, and government. His ability to navigate the regulatory landscape while focusing on user-centric design has earned him recognition as a thought leader in the industry. He is passionate about creating systems that protect privacy, reduce fraud, and foster confidence in digital transactions.

Episode Transcript

 Jarek Sygitowicz: If you have an identity wallet. If you want to use it, click here. If you don’t, you want to do the legacy stuff. No problem. You can go through the old process, the uplift. So the conversion rate increased by 60%. And this is something that you can translate into dollars. So if you spend $1 million per month on marketing 60% like you, we are giving you basically 600 K, you know, for free.

Kevin Rosenquest: Hey there and welcome to Pay Pod, where we bring you conversations with the trailblazers shaping the future of payments and fintech. My name is Kevin Rosenquest. Thanks for joining me today. Online identity is stuck in the past. Most of us are still uploading grainy photos of our driver’s license and crossing our fingers that the system works. But as deepfakes get better and AI blurs the line between real and fake, proving you’re a human and not just a human but you have never been more critical. My guest today is Jarek Sygitowicz, co-founder of Authologic, a company that’s on a mission to modernize digital identity for the global era, from AI powered fraud prevention to plug and play identity APIs. Authologic is helping businesses verify users across borders without sacrificing UX or sanity. In this conversation, we explore how regulation, Covid, and now AI are driving change in identity infrastructure. Why digital wallets are more than just a trend, and how fintechs can future proof their compliance stack without killing conversion. I know that after I had this conversation, I got my digital wallet set up with a digital ID. It’s pretty cool. So anyway, I think you’re gonna like this conversation. So please welcomeJarek Sygitowicz. So is online identity stuck in the past?

Jarek Sygitowicz: Yeah it is. So the gold standard of online identity verification right now.

Jarek Sygitowicz: Is to take a photo of your physical document so you know your plastic ID and then do the liveness test. Sometimes, sometimes you don’t have to do that at all. And, you know, this is something that was invented at the beginning of the internet, basically. So in the beginning you wanted to verify someone and you asked them to post,  to send you the picture of the passport or driving license, and we stuck to it till the 21st century. And,  hopefully this will be replaced by digital identity very soon because it’s,  first of all, not very convenient. And second of all, it’s pretty insecure if you follow the news, you know, companies get hacked all the time. Recently Coinbase lost all of ID. I’m not sure if all the databases, but I think that a significant portion of the pictures of their IDs that they had on file was hacked. So basically anyone with your picture, your picture of an ID can impersonate you online. So it’s very, very insecure.

Kevin Rosenquest: Why? Why has this been so slow to modernize?

Jarek Sygitowicz: There was no incentive for anyone to actually make it better. So if you think about the onboarding process, most of the companies that are doing this online are also doing this offline as well. So if you think about the bank, the bank has branches. It actually is better for the bank if you go to the branch to open a bank account because then they can upsell you. If you are standing. Yeah. So this is like physical contact. You know, the person can talk to you and they can upsell,  something that you probably don’t need or don’t want. So the KYC, AML regulated onboarding is fairly new. And yeah, again, no before Covid. No one wants this process to be convenient. And during Covid, one thing that changed is that the governments,  you know, that normally you would go to the, to the, to the government, you know, branch or office or whatever it is to physically do your,  do your business during Covid. They couldn’t do it. So the governments realized that the current version of identity verification is not good enough. So they started to innovate. So that’s the reason why we are moving away from the I call legacy,  you know, document OCR identity verification to new digital identities because the governments needed this for themselves.

Kevin Rosenquest: That makes sense. That does make sense. Yeah. No doubt.  Obviously it’s not a hot take, but the pandemic changed a lot of things, and it pushed a lot of,  I don’t know, it seems like it kind of pushed a lot of innovation.

Jarek Sygitowicz: Yeah. To give you a perspective, like in the United Arab Emirates. So Dubai, you know, during Covid they launched,  UAE pass. So this is a ID identity wallet. And it, you know, started to get adoption very quickly. And people are using this for everything right now including parking and all the administrative stuff. In Europe we have a lot of innovation around that, especially around identity wallets. So we have our IDs in our phones right now and we don’t need plastic documents. And the regulation actually is changing. It’s called Adas 2.0 regulation that is mandating all the member states of the European Union to issue digital IDs in the form of an app, so you can actually have it in your phone. By the end of 2026, all the member states will need to have this identity wallet. But today, in many countries, including Poland, I’m a Polish citizen, so I have my ID here. I don’t need a plastic document for anything.

Kevin Rosenquest: Okay. Yeah. I’ve seen more and more people in the US here starting to do that too. But businesses are still struggling with it, you know, especially if you think about bars and restaurants. If you go in and you want to get yourself a cocktail and they ask for your ID, I mean, some people are like, I don’t know if I can accept this or not. So it still, at least here in this country, seems like it hasn’t experienced widespread adoption. Or maybe people don’t understand exactly how to use it.

Jarek Sygitowicz: Yeah, I think that,  you know, we mentioned Covid as a kind of forcing function of change within identity space. There’s another one that is coming, which is I, and I think what you say is true. And,  you know, there’s two examples in the world that I know of, the US and the UK. You are especially hostile towards IDs and very hostile towards digital identity. If you mention digital identity to a person from the USA, they immediately,  you know, link this to fascist regime and government that’s trying to control everything that you do. So but you know, AI is changing this perception, I think, because people are starting to realize that digital identity is a necessity in the world of AI because, you know, you don’t know if you are talking to me, if this is a deepfake or not.  maybe I look completely different. Maybe I’m a completely different person. If you’ve recently heard the Reddit story, there is research done by one of the universities. I’m blanking on the name right now, but one of the universities joined Reddit and,  a special Reddit where people are asking to change their opinion and they run a test. How good at changing opinions? The bot is so LLM they hooked up LLM and how good the human is. So it turned out that bot is much better at changing people’s opinion. And you know I’m connecting this to the digital identity. If you don’t know who is human, who is bot, you know, there is no trust anymore on the internet. So I think digital identity is becoming one of the key infrastructure elements of the new internet, where you have, you know, AI agents running around. You need to understand who is human and who is not. It’s becoming a really big problem right now. And I think this will change the perception of many people towards digital identity in countries like the UK, US.

Kevin Rosenquest: Yeah, I think so too. You know, definitely in this country where we tend to be a little bit skeptical of change, especially these days, especially with technology. There’s a lot of mistrust in this country. There’s a lot of problems in this country. We don’t have to go into that. I’m not telling you anything you don’t already know, but. So. Okay, so,  let’s,  you guys let clients use APIs to combine different identity sources, ID docs, bank auth, biometrics. Why is that so important for today’s global businesses? Why is the API system so important?

Jarek Sygitowicz: Yeah. So the big problem with this digital identity infrastructure is that there is a lot of different IDs in the world. That’s the summary. So only plastic documents. So one thing that takes photos of those plastic documents trying to do the analysis of the image was enough. Today KYC and identity verification is more like payments than anything else. So look at the payments,  world. You have Klarna, you have Apple Pay, you have Google Pay, you have ACH bank transfers, right? You have credit cards. If you need something like stripe as a business to connect this to your application or to your website and run with it. Like you don’t want to go on a visa, to Mastercard, to American Express, directly integrate with their APIs, right? Pathologic is basically stripe for KYC. So we do the same thing. We aggregate everything we take care of, you know, building relationships with all the government agencies in the world. We aggregate this into a single API. And then you can plug it into your app to your onboarding workflow. If you’re a regulated company and you don’t have to worry about this, this, this, this complexity of the whole landscape.

Kevin Rosenquest: Okay. And, you know, one thing that’s always, you know, difficult for fintechs is regulations. You know, you talked about KYC. The regulations can be a nightmare. How does Autologic sort of simplify the process, especially for fast growing companies, startups, things like that.

Jarek Sygitowicz: Yeah. So you need to comply with a lot of things, especially AML.  so we are connecting the digital identity to AML checks and to anything else. That is because, you know, regulations are basically all about, you know, decreasing risk of transactions. So you have a lot of elements of the process where you’re trying. You’re trying to figure out whether on the other end, you have a real person,  not a scammer, you know, not a person that is sanctioned or politically exposed. Like, these are the things that you need to figure out. And then you need to understand what is the risk profile of this person, whether this is a, you know, high risk, low risk person. So we have this as one package. And,  we give you the ability to create different workflows for different products. So if you have a if you are a fintech and you have, you know, credit product, you have a bank account, for example, as a as a product.  You need a special workflow for password reset. You know, some people are forgetting passwords, so you need to make sure that this is the owner of the account that is resetting. So these are different business processes. And we give you flexibility on creating those different workflows that you can plug into different business processes. And then you are fully compliant regardless of the market that you operate in. Because, you know, our sweet spot is our companies that are operating on multiple different markets. So if you are in the US, you have different regulations than in the UK, in the EU, in Latin America, in the Middle East, in Asia, there’s different requirements you need to comply with. So we give you this flexibility not only on the business process level but also on the geography level. Like we are connected to everything and we help you to be compliant with all those different,  you know, jurisdictions in different geographies.

Kevin Rosenquest: Yeah. Especially like if you’re going global, if you’re international, I mean that’s got to be. Yeah. That’s tricky for startups, for, for fintechs. So  yeah, that’s really cool. You know, I also wanted to bring up the idea that, you know, frictionless UX, which is obviously what everybody wants, and secure verification, you know, they can sometimes butt heads. You know what I mean? To keep that friction away. I mean, everybody, we all know that, you know, two factors or all the other stuff is important. But every time you got it, you’re like, oh man, I got to get this stupid code. Like, you know, I mean it. People get crazy. What is that sweet spot? How can fintechs avoid sort of making the wrong trade off when it comes to,  you know, UX versus. Which is security?

Jarek Sygitowicz: Yeah. So this is one of the few examples I can think of actually two. So identity wallets are much more convenient than the typical KYC process. And I can show you this in a moment.  live demo. And the second I think is Passkeys. So I’m not sure if you are using passkey, but this is much more convenient, especially if you are using Apple ecosystem. So an identity wallet is actually super convenient because you know, I can first of all show you what an identity wallet looks like. So this is my wallet. My ID and driving license are here so I can show you my driving license. I don’t need a plastic document and the whole process. Let me jump into the demo. So the whole process I will describe this to the audio only users. You click on the button I want to verify with the identity Wallet. Then the system recognizes that you have an identity wallet installed on your phone. So you jump to the wallet. And what wallet does is actually presents you with information about who is the business or or you know, who is the party that will receive the data and what kind of data they will be receiving. Then you can confirm and type in your Pin number and that’s it. You just onboard it. So basically that’s it.

Kevin Rosenquest: Like that’s really.

Jarek Sygitowicz: Cool. Typical. It takes 20s for a typical user according to our, you know, analytics, if you are doing this through pictures it’ll be up to five minutes. You know, I don’t want to mention the companies that are doing KYC for multiple days, but I’m talking about the you know, you took the perfect picture of your ID, you know, you know, blurry photos you took. There was nobody behind you. Good lighting. You did the liveness test between three five minutes. It will take you again if you have your ID ready. You know everything is perfect. Then it’ll take you a couple of minutes. So. Yeah.

Kevin Rosenquest: Yeah. That’s cool. I’ll have to look into that. That sounds way better. I’ve been doing it. Why is relying on a single verification method like ID uploads no longer good enough in global fintech?

Jarek Sygitowicz: Yeah. So,  this is,  you know, the KYC is one of the bottlenecks of the conversion rate, right? So if you are a fintech, you spend a lot of money and, you know, big fintech spend like, you know, millions of dollars per month to attract users to their app. So look at this from the funnel perspective. You spend money on marketing. You drive people to your website. You convince them to download your app or create an account in your app. So you have already, you know, conversion rates on that funnel and then they hit KYC. And even if you have very well motivated customers, you will hit roadblocks with the traditional OCR liveness. One of them is like you won’t be able to onboard during the night. Like if you imagine lying in front of your TV, you saw the ad on the TV. You want to download the app onboard. Oh, it’s too dark to take a photo, right? So that’s one problem with drop off during KYC. The other problem is like, okay, found your ID. You know, like is perfect. I want to do it. Blurry photos are the problem. All kinds of issues. If somebody walks behind you during the liveness check it cannot be used because of AML. So all kinds of problems, technical problems like, you know, apps are crashing because of the SDK provided by the company doing KYC. All kinds of problems technically. But there’s an additional problem like in the markets where IEDs are popular, you don’t want to use OCR liveness as a customer.

Jarek Sygitowicz: You are going like, why don’t you support bank ID? Why don’t you support ID? Why don’t you support Identity wallet? It’s becoming increasingly problematic. And again with this analogy to the payment world. Like I’m a, you know, heavy Apple Pay user I will switch providers. If they don’t offer me Apple Pay right, I will buy somewhere else if they don’t like me. So you will have more and more people and we see this on the statistics like we have a customer. And this is kind of a poster child of, you know, the whole,  you know, uplift,  conversion rate, uplift movement, let’s say. So they were using only OCR and lightness. You saw on the statistics how many problems their users had with blurry photos, you know, all kinds of technical stuff. And then they enabled Identity Wallet as an additional option. So if you have an identity wallet, if you want to use it, click here. If you don’t you want to do the legacy stuff. No problem. You can go through the old process, the uplift. So the conversion rate increased by 60%. And this is something that you can translate into dollars. So if you spend $1 million per month on marketing 60%. Like you, we are giving you basically 600 K, you know, for free.

Kevin Rosenquest: Wow. Okay. You know, we talked about how, you know, you call them legacy. It’s behind. Digital identification is behind. Where do you think it’s going to head now. Because we seem to be moving obviously much faster. Ai is pushing things. You’ve got three decentralized ID systems. What do you think is next.

Jarek Sygitowicz: So I think what will be next is a moment where you will have governments offering, like a lot of governments offering you the digital identity. A lot of people will be onboarding, so the adoption will grow, but we will be in this kind of transitional period where you have new customers that want to use IDs, they want to use identity wallets. But at the same time, you will have a lot of people that still want to use the old stuff. So you need something that will orchestrate the legacy systems with the new ones. So you will have this balance, like I think about this as cash and card. So you will if you go to the coffee shop, they will take money like, you know, like they always do. They will take card. You can pay with both because this is the best for conversion rates. That’s exactly what happen. The same thing will happen with KYC. You need to balance both worlds. And eventually at some point in time, you will have, you know, an identity wallet only. But you know, this is still like five, ten years from now. So we need to have something that will marry the two worlds together.

Kevin Rosenquest: So you think eventually it’s going to be like, kind of like everything else? Eventually you’ll have to have a digital wallet or digital identity. An identity wallet. I’m sorry.

Jarek Sygitowicz: No. No one is mandating people, so no one will tell you to have digital ID right now, as no government is forcing you to use the card. Of course, they have a lot of incentives because from the tax perspective, it’s better if you pay with the card because it’s, you know, more transparent for the government. They can audit it like cash is where the gray area is typically. So that’s why they incentivize this. But they are not forcing anyone to use IDs. What I haven’t mentioned is the one thing that is very interesting about the IDs or identity wallets,  is that you can have within your identity wallet, not only not only your identity. So not only your ID, as we call them in Europe, is a personal ID document, but you can also have additional information so you can have Iban number verification.  you can add it from your bank. So an Iban number is a bank account number that is verified and you can store it in your wallet. It is quite important for some of the cases. You can have your tax information as well in your wallet. So the reason why I’m mentioning this is that even if you have this beautiful world where everyone is using an identity wallet, you will still have each individual person. They will have a different set of data in their wallet. So you still need something like an ID hub that will orchestrate this, these different data sets. And maybe if you don’t have Iban verification verified in your wallet, maybe you want to have,  you know, alternative path like,  money transfer or something else or document from the bank. So the identity wallet will be useful today because, you know, you need to orchestrate the legacy with the new identity IDs, basically. And it will be useful when IDs will have 100% coverage and everyone will be using them. Still, there will be a problem of, you know, different data sets within each individual wallet.

Kevin Rosenquest:  And you mentioned AI before and the benefits of that. I mean there’s risks and rewards to everything. Where do you see the risks. Where do you see the rewards when it comes to using AI and identity authentication?

Jarek Sygitowicz: So I right now is being used to actually combat AI. So  I mean the AI being used  to  do image analysis to try to figure out whether the image of your document is being AI generated or not. Ai is also used in liveness checks. So it’s an arms race, I think. Arms race,  where, you know, you use AI to, to try to spot where AI is being used to, to, to for fraud.  In digital identity, there is no AI, it’s only cryptography. So basically cryptography is fighting AI in this case 

Kevin Rosenquest: For for any early stage fintechs, what would be some like one piece of advice you would give them when it comes to identity verification and compliance especially, you know, the ones that are, that are just starting out and want to be, you know, want to be ready for the next wave.

Jarek Sygitowicz: Yeah. I would try to understand what is the if you are a new company, you need to have a target. Like what are you selling in North America or in Europe. What are the places that you’re selling to? And then I would try to investigate what are the most used,  identity verification methods because it used to be the case, like two years ago, three years ago, where there were almost no IDs or the adoption was really low. It’s not the case anymore. If you go to the market, you need to understand what’s being used in us. It’s changing dynamically as well. So,  you guys have models and a mobile driving license. So I would try to understand, you know, in which state I’m operating, what is the current landscape? And then I would try to,  try to adopt something like an IDE hub,  to be ready for today’s challenges, but also,  for the future, because again, next year,  Ides will be mandated by the European Union. So if you are operating in Europe, then it’s not a question of if you are using a digital identity, it’s only a question of when you are starting to use it.

Kevin Rosenquest:  yeah. All right. Well great tips.  All right. Well, the company is, Jarek Sygitowicz, thanks so much for being here. Really appreciate your time.

Jarek Sygitowicz: Thank you very much. Thank you. Thank you for the invitation.