For the better part of the last decade, video identification (aka Video-Ident) has been the dominant way that German financial institutions onboard customers remotely. While many other European regulators were more open to automated verification methods, German financial institutions took a different path, leaning heavily on live video interviews with human operators.
This didn't happen by accident. It caught on because BaFin's original 2014 framework for remote customer identification emphasised human supervision and real-time verification. Video-Ident emerged as the natural solution to meet these regulatory requirements, creating a market where this technology became not just accepted, but expected.
But the European Union's new Anti-Money Laundering Regulation will need to be complied with by mid-2027, and it could lead to a sea change in how German financial institutions — and those across the EU, for that matter — think about KYC.
This EU-wide regulation is expected to completely replace local AML frameworks like BaFin’s in Germany, since the new rules will be directly applicable in all EU Member States. For German institutions, this represents a dramatic shift — and a significant opportunity to adopt faster, more frictionless KYC solutions that improve customer experiences and operational efficiency.
In this article, we’ll discuss how the new AML Regulation positions automated, eIDAS-compliant solutions to become the primary standard in KYC onboarding, and examine the opportunities this regulatory change brings to the market.
A short history of how we got here
To understand what opportunities the new AML Regulation presents, it helps to consider the current technological and regulatory landscape.
To start, let’s examine why Video-Ident remains entrenched in the German market despite the strong performance of automated KYC alternatives like Fourthline’s German flow.
While BaFin technically allows alternatives to Video-Ident — including German eID and qualified electronic signature (QES) processes — these alternatives currently face additional regulatory requirements that Video-Ident does not. For example, a QES-based flow in Germany is currently required to include the additional step of bank account verification.
This may seem to give Video-Ident an advantage, but the data instead shows clear advantages for automated solutions.
Video-Ident costs three to four times more than (semi-)automated solutions and earns approval from only 11% of customers who find it user-friendly. Meanwhile, millions of German customers successfully used automated alternatives like Fourthline’s German flow in 2024 alone, showing these methods work effectively at scale.
Given this, there is already a strong business case for German companies to consider automated alternatives. The EU's new AML Regulation makes this transition path even more attractive by creating clearer regulatory support for these technologies.
How the new AML Regulation supports innovation
The EU's new AML Regulation takes a refreshingly modern approach to financial crime prevention. At its core, the regulation seeks to replace the current patchwork of country-specific implementations with a single harmonised framework that works consistently across all EU member states.
This regulatory modernisation addresses real operational challenges. It's about creating a more efficient financial system that can respond to modern threats while reducing operational complexity and improving customer experiences.
As Fourthline’s General Counsel Fleur de Roos explains, "the EU is really looking to simplify things” with the new regulation. “The administrative burden is sky-high, and regulators see that they need to start being more pragmatic."
This pragmatic approach recognises that the current system, with its layers of national interpretations and gold-plating, has created compliance costs that undermine rather than enhance security. It also reflects a technological philosophy that has evolved over the years to support automated, cryptographically secured verification methods as viable primary solutions.
Under this new framework, eIDAS-compliant methods including electronic IDs, qualified electronic signatures (QES), and digital wallets are poised to become the primary solutions that institutions offer by default. This regulatory shift recognises these technologies as the most appropriate choice for modern verification needs, while Video-Ident serves as a valuable alternative for situations where these primary methods, according to the text, "cannot reasonably be expected to be provided."
This will essentially flip the German way of doing KYC on its head and more closely align the country with the rest of Europe. Technologies that German regulations currently treat as alternatives will become the EU standard, enabling forward-thinking institutions to benefit from European best practices.
A new wrinkle that may hasten the shift to eIDAS-compliant methods
The new AML Regulation also introduces a new source of friction that could complicate Video-Ident's viability moving forward.
Today, German customers can enter a Video-Ident flow without providing explicit consent. But under the new framework, institutions choosing Video-Ident for customers who could potentially use eIDAS-compliant methods may need to document this decision and demonstrate that the primary options were genuinely unavailable (rather than simply less convenient).
The compliance burden extends beyond justification requirements. Given that the new Anti-Money Laundering Authority (AMLA) will directly supervise the largest cross-border financial institutions, there will be significant pressure for consistent, defensible verification choices. Institutions may face scrutiny over their decision-making processes when selecting verification methods.
The regulation's emphasis on primary methods creates compliance advantages for eIDAS-compliant methods. The current draft technical standards prioritise these methods, positioning them as the clear choice for forward-thinking institutions. While the language around alternatives maintains some flexibility, the strategic path forward is clear for institutions that want to future-proof their operations.
The consultation period for the draft closed on June 6, 2025, with final guidance expected in October 2025. Regardless of any minor refinements, the regulatory direction strongly favours automated, eIDAS-compliant solutions.
For companies ready to embrace the future, the optimal compliance strategy is clear: prioritise proven automated methods that align with regulatory preferences and deliver superior customer experiences.
The KYC solutions of tomorrow are already available
One of the most encouraging aspects of this regulatory transition is that the technology needed to succeed in this new environment already exists. QES-based solutions aren't experimental concepts — they're proven technologies that have already effectively served millions of German customers.
Fourthline's German flow exemplifies how this technology works in practice. The solution combines QES with streamlined verification processes that meet current BaFin requirements and offer a smoother onboarding experience than traditional video-based approaches.
Surprisingly, this solution may even become simpler under the new AML Regulation.
Currently, Fourthline's German flow includes bank account verification as an additional security step to satisfy BaFin's requirements. However, under the EU's harmonised approach that prioritises eIDAS-compliant methods, this additional layer may no longer be necessary.
So, while upcoming regulatory changes may result in a shift away from Video-Ident, they could make the alternatives even more attractive. Companies have an extra incentive to move toward flexible, modular solutions that are positioned to take advantage of the more streamlined regulatory environment in 2027 and beyond.
What forward-thinking institutions are doing right now
The timeline for this regulatory change provides institutions with nearly two years to prepare. But proactive institutions are already taking steps to fortify their future.
The first step is to strategically evaluate current verification performance and identify optimisation opportunities. Many institutions are discovering that exploring automated alternatives reveals significant advantages in performance metrics.
Leading institutions are also demanding a more bespoke approach from their verification providers — with a focus on solutions that can adapt to their specific use case as it evolves. After all, the European regulatory landscape will continue evolving, and institutions need partners who can strategically adjust their verification flows without requiring complete system overhauls.
The transition to automated eIDAS-compliant solutions represents a positive development — both for institutions and their customers.
The most successful transitions will likely offer customers a choice during the adjustment period. Several German banks have already implemented flows that allow customers to select between Video-Ident and automated alternatives, with the vast majority choosing automated verification when given the option. This approach has two advantages: providing data about customer preferences while building institutional confidence in automated technologies.
The future looks brighter with Fourthline
A change is coming in Germany’s approach to KYC. The EU's new AML Regulation simply formalises what forward-thinking institutions have already learned: that modern AI-powered solutions like Fourthline’s can deliver better security, efficiency, and conversion rates compared to manual processes.
For German financial institutions, the question isn't whether this change will happen, but how to best take advantage of it. The institutions that will thrive in this new regulatory environment will likely be those that move quickly and take this opportunity to streamline and future-proof their onboarding processes
As the German verification landscape evolves, there are clear opportunities for institutions ready to adapt. This regulatory shift supports better customer experiences and operational improvements for institutions that plan ahead.
To learn more about how Fourthline can help your business navigate these changes effectively, get in touch with our team today.
This article incorporates insights from Fleur de Roos, General Counsel at Fourthline. It is for informational purposes only and does not constitute legal advice.
