Instagram isn't a bank

Not yet... Preemptively fulfilling KYC requirements probably eases the barriers to incorporating financial services into the platform. I'm not a fan of this, just thinking out loud

It seems like a stretch to think Instagram is entering the financial services space. Facebook owns Insta and Messenger already offers payments. It's probably more likely that Instagram is using traditional KYC tools, probably developed for other parts of the Facebook ecosystem, to influence other KPIs such as the number of bots in the system. But that's just my own guess as well.

I didn't have to show ID to create my Paypal or Venmo accounts.

I have opened several bank accounts online and never have been asked for photo id. SSN and some knowledge-based auth sure, but no photos.

SSN and knowledge based auth are sometimes sufficient depending on where you fall against the company's risk model.

KYC processes are a type of situation where it is not a good idea to extrapolate all people's experience from one person's. The underlying mechanisms intentionally vary from person to person.

SSN will give them something to look up in the central registry; as a bank they'll have the authority to do requests for information.

KYC doesn't require a photo, does it?

I think it does. Couple of online banks I tried out all needed a short video of my face saying my name, not just photo of ID, that’s not enough anymore.

In Norway it does unless you use the national BankID electronic signature. I'm pretty sure this is standard in most of Europe. To get my BankID I had to submit an authenticated copy of my passport done by the postal service as they didn't accept regular drivers license or anything else.

I also work in a bank, breach of KYC procedures could in the worst case land the caseworker and/or manager in jail for two years and all employees are required to undergo AML training at least once every two years.

Edit: was to be a response to the parent comment as there is no requirement for video here.

Pretty far from the same thing buddy, do some research