New SSN Rule Eases Digital Account Onboarding for Banks and Fintechs

In a rare display of regulatory alignment, four major U.S. financial regulators have made it easier for banks and fintech companies to onboard customers digitally. On June 27, the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), National Credit Union Administration (NCUA), and Financial Crimes Enforcement Network (FinCEN) jointly announced a major update to the Customer Identification Program (CIP) Rule, easing the long-standing requirement to collect the full nine-digit Social Security Number (SSN) directly from customers during account opening.

A Major Win for Digital Identity and Customer Experience

Previously, financial institutions were required to collect the entire SSN directly from customers as part of the onboarding process. This created significant friction for digital-first platforms, particularly those leveraging modern identity verification tools. Many fintechs argued that the rule was outdated, especially when third-party services could already verify SSNs securely behind the scenes.

With this new guidance, banks and fintechs can now use trusted third-party data providers to obtain and verify SSNs under their risk-based CIP procedures. This change unlocks a smoother onboarding process and improves user experience without compromising regulatory compliance.

Key benefits of this update include:

• Faster digital onboarding with fewer customer drop-offs
  
  

• Streamlined user interfaces that eliminate manual SSN entry
  
  

• Enhanced security by relying on sophisticated verification technologies
  
  

The change also reduces opportunities for identity theft, since rigid, predictable verification processes are often easier for fraudsters to exploit. A risk-based approach allows adaptive verification methods that respond to real-time fraud risks.

How This Rule Modernization Impacts Financial Services

This rule update signals a growing willingness among regulators to adapt compliance rules to reflect the realities of modern financial services. Tools such as biometric verification, tokenized data, and advanced KYC vendors are often more effective and secure than manual methods or outdated forms.

For marketing and product teams, this shift presents a clear opportunity to promote faster, simpler account opening processes. The ability to deliver a frictionless onboarding flow without sacrificing regulatory integrity can serve as a competitive advantage.

Here’s what financial institutions and fintechs can now emphasize:

1. Seamless, fast account opening without manual SSN entry
   
   

2. Strong security through advanced identity verification methods
   
   

3. Compliance with federal rules while offering a smoother user experience
   
   
   

What Compliance Teams Still Need to Know

While this change simplifies the process, it is not a rollback of Know Your Customer (KYC) or anti-money laundering (AML) responsibilities. The following requirements remain in place:

• Institutions must maintain a written CIP.
  
  

• They must collect adequate identifying information.
  
  

• Identity verification must occur before the account is officially opened.
  
  

• Documentation and ongoing monitoring procedures are still required.
  
  

The difference now lies in how identity data can be gathered and verified. As long as third-party data sources are reliable and well-documented, institutions can meet their obligations without requiring customers to directly submit their SSNs.

Looking Ahead: A Shift Toward Flexible, Tech-Driven Compliance

This policy update follows years of advocacy from fintech trade organizations and reflects a broader regulatory trend favoring flexibility and technological modernization over outdated processes.

As AI-driven tools, biometric technologies, and API-based onboarding platforms continue to grow, more changes like this are likely on the horizon. Regulators are showing increased openness to compliance frameworks that balance security, customer experience, and financial inclusion.

For banks, fintechs, and digital platforms, the message is clear: building fast, secure, and user-friendly onboarding flows is not only possible, it’s now encouraged. Those who adopt tech-forward approaches to compliance will be better positioned to attract customers and navigate future regulatory updates.