Author: Adam Mendas

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What is PSD2 Compliance? Everything You Need to Know About It

what is psd2 compliance

Businesses must stay compliant with all emerging regulations, not just for legal reasons, but also for keeping themselves afloat. One important regulation businesses must comply with is the PSD2 compliance, also known as the Revised Payment Services Directive.

The EU enforces PSD2 and the regulation aims to improve consumer protection. The second part of the regulation is igniting competition within the payment services industry.

PSD2 is a step above PSD1 as it requires new things from financial institutions and consumers.

Primary Aspects of PSD2

The Payment Services Directive (PSD2) regulation has some key pillars that every financial institution needs to follow:

  1. Access to Account (XS2A)

PSD2 compliance requires banks to open their payment infrastructure to third-party providers, this allows TPPs to initiate payments or access account information with the customer’s consent. 

This new regulation aims to ignite competition and innovation among financial institutions. 

  1. Strong Customer Authentication (SCA)

PSD2 also introduced an authentication requirement for electronic payment to reduce the risk of fraud. This also involves using independent verification factors such as: 

So let’s say a user wants to make an online purchase over €100, they’ll have to verify their identity using a password and a code sent to their mobile device. This added layer of authentication ensures customers can make their transactions seamlessly &  safely.

  1. Enhanced Consumer Rights

PSD2 also aims to give consumers more control over their payment disputes and unauthorized transactions and to grab more explicit charges and terms. This new approach aims to teach financial institutions to focus more on a consumer-centric approach.

Let’s take an example – If a customer notices an unauthorized transaction on their bank statement, PSD2 ensures they have clear knowledge to dispute the charge and receive a quick resolution.

How PSD2 Impacts Financial Institutions?

As for financial institutions, PSD2 will have a huge impact. It requires them to adapt to new operations and they will have to face technical challenges:

  • Increased Competition – With TPPs being able to initiate payments with consumer’s consent, banks will face increased competition for customer loyalty and transaction volumes. Institutions that embrace collaboration with FinTechs will be able to take advantage of the increased competition. 
  • Investment in Technology: The PSD2 regulation requires banks to improve their API integrations, increase security measures, and comply with SCA requirements. Financial institutions need to invest in scalable technological solutions that can carry them into the future.
  • Customer-Centric Innovation – By using open banking APIs, banks and other institutions can take customer experience to the next level. This involves personalized financial advice, easy payment processing, and real-time transaction monitoring.

Other Major Changes That Will Come with PSD2

Beyond basic operational impacts, PSD2 will have some impacts on the industry:

  • Data Privacy & Consent – PSD2 builds up on PSD1 and enhances the importance of data privacy and informed consent, offering better control over their financial data. Businesses and financial institutions need to implement transparent data practices and consent management frameworks to comply with the regulations
  • Global Implications –  While PSD2 is an EU regulation, it will influence regulatory frameworks worldwide. Institutes that operate globally need to adapt to varying compliance requirements and ensure everything is up to standard.

Conclusion

PSD2 compliance offers a unique opportunity for financial institutions to innovate, offer a more consumer-centric approach, and build stronger consumer-business relationships. Institutions that focus on PSD2 compliance with heart will be able to leave the competition behind.

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How to Build a Holistic Approach to Combat Gen AI Fraud?

combat Gen AI fraud

In recent years, the rapid advancements in Generative AI (Gen AI) have revolutionized various industries, from content creation to customer service. However, as with any powerful technology, Gen AI has also been exploited for malicious purposes, giving rise to a new wave of sophisticated fraud.

This blog will explore how organizations can build a holistic approach to combat Gen AI fraud, encompassing technological, procedural, and human elements.

Understanding Generative AI Fraud

Generative AI fraud involves the use of AI models to create convincing fake content, including text, images, audio, and video. These models can generate deepfakes, synthetic identities, fake news, and more, making it challenging to distinguish between genuine and fraudulent content. 

The implications of Gen AI fraud are vast, affecting sectors like finance, healthcare, entertainment, and politics.

Technological Solutions for Gen AI Fraud

  1. Online Verification Solutions

Even with Gen AI solutions, fraudsters love to use fake IDs and synthetic IDs. Using online document verification solutions like DIRO can help businesses verify fake documents used for fraud. DIRO’s proprietary technology can verify fake documents instantly by cross-verifying the document information from the issuing source. 

By integrating DIRO online document verification solution into the core services, financial institutions and businesses can combat Gen AI fraud.

  1. Advanced Detection Algorithms

Developing and deploying advanced detection algorithms is crucial in identifying Gen AI-generated content. Machine learning models trained on large datasets of both genuine and fake content can learn to recognize subtle differences that human eyes might miss. These models can be integrated into various platforms to automatically flag suspicious content for further review.

  1. Blockchain for Data Integrity

Blockchain technology can be leveraged to ensure the integrity of digital content. By recording the origin and modifications of digital assets on a blockchain, it becomes easier to trace their authenticity. This decentralized ledger can help verify the legitimacy of content, reducing the risk of tampering and fraud.

  1. Digital Watermarking

Digital watermarking involves embedding unique identifiers into digital content, which can be used to verify its authenticity. These watermarks are often imperceptible to human senses but can be detected using specialized software. Implementing digital watermarks in media files can help track the source and prevent unauthorized use or manipulation.

Approach to Fighting Generative AI Fraud

  1. Robust Verification Processes

Organizations must implement robust verification processes to authenticate identities and transactions. Multi-factor authentication (MFA) and biometric verification can add layers of security, making it harder for fraudsters to impersonate legitimate users. 

Regular audits and compliance checks can also ensure that security measures are up-to-date and effective.

  1. Continuous Monitoring and Incident Response

Continuous monitoring of digital platforms is essential to detect and respond to fraudulent activities in real time. Implementing automated monitoring systems that use AI and machine learning can help identify anomalies and potential fraud attempts. 

Additionally, having a well-defined incident response plan can ensure quick and effective action when fraud is detected.

  1. Regulatory Compliance

Adhering to regulatory standards and guidelines can provide a framework for combating Generative AI fraud. Organizations should stay informed about relevant regulations in their industry and ensure compliance. 

This includes data protection laws, cybersecurity standards, and industry-specific guidelines that address emerging threats.

Using Human Element

  1. Employee Training and Awareness

Educating employees about the risks and indicators of Gen AI fraud is crucial. Regular training sessions can help staff understand how to identify and respond to suspicious activities. Creating a culture of vigilance and encouraging employees to report potential fraud can enhance the organization’s overall security posture.

  1. Collaboration and Information Sharing

Collaboration with other organizations, industry groups, and law enforcement agencies can strengthen efforts to combat Gen AI fraud. 

Sharing information about new threats, vulnerabilities, and best practices can help build a collective defense against fraudsters. Participating in industry forums and working groups can also provide valuable insights and resources.

How Financial Sector Can Fight Gen AI Fraud?

The financial sector is particularly vulnerable to Gen AI fraud due to the high value of transactions and sensitive data involved. A holistic approach to combating Generative AI fraud in this sector includes:

  • Technological Solutions: Implementing AI-driven fraud detection systems that analyze transaction patterns and flag anomalies. Using blockchain to secure transaction records and digital identities.
  • Procedural Measures: Enforcing strict KYC (Know Your Customer) procedures and regularly updating verification processes. Establishing a dedicated fraud detection and response team.
  • Human Element: Training employees to recognize signs of synthetic identities and phishing attempts. Collaborating with other financial institutions to share threat intelligence and best practices.

Conclusion

Combating Gen AI fraud requires a multifaceted approach that integrates technological solutions, procedural measures, and human vigilance. By leveraging advanced detection algorithms, blockchain, and digital watermarking, organizations can enhance their ability to identify and prevent fraud.

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How does Bonus Abuse Fraud Work in iGaming and How to Prevent It?

Bonus Abuse Fraud

The iGaming industry, encompassing online casinos, sports betting platforms, and poker rooms, uses a wide range of bonuses to attract and retain players. These bonuses come in various forms such as welcome bonuses, no-deposit bonuses, free spins, and loyalty rewards.

What is Bonus Abuse Fraud?

Every single casino out there offers these promotions as they help get new users in the door. However, they also attract fraudsters who exploit these bonuses. 

Understanding how bonus abuse fraud works and implementing effective prevention strategies is crucial for maintaining a fair and sustainable gaming environment.

  1. Multiple Account Fraud (MAF)

Fraudsters usually create multiple accounts using fake identities or stolen information to claim bonuses multiple times. Not just that, fraudsters also use VPNs, temporary email addresses, and virtual phone numbers to bypass detection.

This leads to inflated acquisition costs for the operator and disrupts the integrity of the gaming platform.

  1. Collusion

Collusion fraud happens when a group of players work together to exploit bonuses offered by Casinos. This is especially common in games like poker. Once they start playing, they coordinate their bets to minimize losses and maximize winnings. In the end, they steal a lot of money from casinos and transfer all the bonus funds to a single account.

This undermines fair play and can lead to significant financial losses for the platform.

  1. Arbitrage Betting

Players take advantage of differences in odds between different betting sites or within the same site to place bets that guarantee a profit regardless of the outcome. This is often done using bonus money.

While not illegal, arbitrage betting can skew the risk calculations of the platform, leading to unintended financial exposure.

  1. Value Betting:

Players identify bets with positive expected value, typically using bonus funds, to exploit the promotional offers. This is more common in sports betting. Persistent value betting can lead to sustained losses for the operator if not managed properly.

Strategies to Prevent Bonus Abuse Fraud

  1. Robust KYC (Know Your Customer) Processes

Ensure thorough verification of user identities using advanced KYC tools. This includes verifying documents, checking for duplicate accounts, and using biometric verification where possible.

Helps in detecting and preventing the creation of multiple accounts by the same individual.

  1. Behavioral Analysis and Machine Learning

Use machine learning algorithms to analyze player behavior and detect patterns indicative of fraud. For instance, rapid bet placement, identical betting patterns, and simultaneous logins from multiple accounts can be red flags.

  1. Geo-location Tracking

Utilize geo-location technologies to track the physical location of players. Ensure that players are not using VPNs or proxies to mask their true location. Prevents fraudsters from creating multiple accounts from different locations to claim bonuses.

  1. Dynamic Bonus Structures

Design bonuses that are dynamic and tailored to individual player profiles rather than one-size-fits-all. Include wagering requirements that scale with player activity and behavior. Reduces the attractiveness of bonuses to potential fraudsters while still rewarding genuine players.

  1. Limitations and Monitoring

Set limits on bonus eligibility, such as capping the number of bonuses a player can claim in a certain period. Continuously monitor for unusual activity and adjust limits as needed. Monitoring prevents abuse by limiting the potential gain from fraudulent activities.

  1. Collaboration and Information Sharing

Join industry groups and share information about known fraudsters and emerging fraud tactics. Collaborative databases can help identify repeat offenders across different platforms. Information sharing among platforms enhances overall industry defenses against bonus abuse.

Conclusion

Bonus abuse fraud is a persistent threat in the iGaming industry, but it can be effectively mitigated with a combination of technology, strategic planning, and industry collaboration.

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A Comprehensive Guide to Global Identity Verification

As consumers of today have access to services across the globe, businesses need to rely on global identity verification solutions to maintain security. Global Identity verification is crucial in verifying the identity of individuals globally.

In this guide, we’ll walk you through the Global identity verification process and its importance for businesses.

Breaking Down Global identity verification

Global identity verification, as the name suggests is the process of verifying identities globally. Global ID verification works by verifying information provided by individuals. This is done to ensure that the individuals’ businesses onboard are who they claim to be.

With global identity verification, businesses can maintain security and privacy.

Importance of Global Identity Verification

Global identity verification is crucial to maintain the security of businesses across various sectors. Most commonly used in finance, e-commerce, and healthcare. With global identity verification, businesses can minimize the risk of fraud, money laundering, and identity theft risks.

How Global Identity Verification Works?

Global identity verification involves several steps:

  • Online document verification
  • Biometric authentication
  • Database checks

Businesses that are available to customers globally need to verify identities of all kinds. Global identity verification has a series of steps that help ensure the identity information provided by a consumer is valid: 

  1. Collection of Information

The first step is to verify personal information. Most businesses require basic information, such as: 

  1. Verification of Documents

Businesses verify customer identities via online document verification, cross-checking information from global databases, and more.

The document verification solution verifies security features such as watermarks, holograms, and serial numbers to verify information.

  1. Biometric Verification

A lot of businesses also verify biometric information, such as fingerprints, facial recognition, or iris scans. Then this information is verified across a central database. Biometric verification adds an extra layer of security and helps prevent identity fraud.

  1. Verification Against Databases

Whatever information businesses collect from users is cross-referenced with databases maintained by governments, financial institutions, and other databases. Cross-referencing information from databases can confirm the authenticity of information. Doing so helps businesses check for any discrepancies or red flags, such as criminal records or fraudulent activities.

  1. Third-Party Verification

While this is not a fixed part of the global identity verification process, a lot of businesses also use third-party verification services. Especially when they need to verify identities across borders. 

Third-party verification services use their own database to verify the identities of users.

Traditional Methods vs. Modern Solutions

Traditional identity verification methods were completely based on physical document verification. That includes driver’s licenses and passport verification.

New-age identity verification methods have changed how businesses interact with customers all across the world. Businesses can now access more efficient and secure solutions, including biometric authentication and online document verification.

Benefits of Global identity verification

Global identity verification has a range of benefits for both businesses and consumers. 

  1. Enhanced Security

By accurately verifying the identity of users, businesses can improve their security, and prevent the risk of fraud (money laundering, ID theft, etc.)

  1. Streamlined Processes

Global identity verification streamlines the customer onboarding processes. With global identity verification solutions, businesses can seamlessly onboard customers while adhering to regulatory requirements.

Challenges and Considerations

Similar to everything, global identity verification has its benefits and challenges. Here are some of the most common challenges:

  1. Privacy Concerns

As businesses collect and store personal data, it raises concerns regarding privacy and data security. To circumvent these challenges, businesses need to implement strong data security and privacy methods.

  1. Regulatory Compliance

Businesses have to comply with regulatory challenges. Complying with regulations is a challenge for businesses as they require a lot of effort.

FAQs (Frequently Asked Questions)

  • How does global identity verification contribute to fraud prevention?

    Global identity verification helps businesses verify the authenticity of user identities, thereby reducing the risk of fraudulent activities such as identity theft and account takeover.

  • Is Global identity verification mandatory for businesses?

    While not mandatory in all cases, many businesses choose to implement Global identity verification to enhance security and comply with regulatory requirements.

  • What are some common methods used in Global identity verification?

    Common methods include document verification, biometric authentication, and database checks.

  • How does Global identity verification impact user experience?

    When implemented effectively, Global identity verification can streamline the user onboarding process, enhancing the overall user experience by reducing friction and delays.

  • What role does technology play in Global identity verification?

    Technology plays a pivotal role, enabling businesses to deploy advanced identity verification solutions such as biometric authentication and machine learning algorithms.

  • How can businesses ensure compliance with data protection regulations when implementing Global identity verification?

    Businesses must prioritize data protection measures, including encryption, access controls, and regular security audits, to ensure compliance with data protection regulations such as GDPR and CCPA.

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Can Strong Fraud Protection Bring in More Customers?

strong fraud protection

According to several surveys, it has become evident that strong fraud protection is the first thing in banking customers’ minds.

In this world of growing fraud, it’s no surprise that customers want some sense of security. The banking and financial services landscape has grown at an exceptional pace in the last decade. Fraudsters have taken complete advantage of these untested changes. Resulting in higher-than-ever fraud records every year.

In the UK, trade bodies have asked to consider fraud levels a national threat. Financial services businesses have increased their investment in fraud prevention and ID authentication solutions.

What Customers Want From Banking Institutions?

Since the start of the growth of digital banking, customers want strong authentication above everything else. It has become the primary deciding factor when it comes to choosing a financial service provider.

In EMEA countries, great fraud protection is the number one factor when choosing financial services. 

Here’s a breakdown of the percentage of people in each country who put security above everything else:

  • Germany – 36%
  • South Africa – 34%
  • Sweden – 32%
  • UK – 36%

Incredible level of fraud protection as a priority has been growing for customers. Businesses that have failed reputation around fraud protection tend to be less attractive to customers. 

With the growing number of people wanting great fraud protection, a business that can make it happen will gain a competitive advantage.

Fraud Attacks and Highlights in Media

Media coverage of the number of growing attacks in recent years has made customers more aware of security. Around 1 in 4, customers believe that their identities could have been stolen and used by fraudsters to open fake accounts.

The increased coverage by the media has helped customers understand the necessity of protecting their identities and protecting themselves from fraud. One in two customers even understand the importance of protecting their identity to help prevent money laundering.

Friction is a Problem

Security checks by financial institutions have increased globally. Each country has its own regulatory body that set the rules and guides for security checks. In the last 5 years, customers have seen significant growth in online ID checks when signing up online and making purchases. 

One in four South Africans has stopped or reduced their use of credit cards for online transactions because of the time-consuming checks. In the UK and Germany, the number is around 1 out of every 5 people. 

This is not to say that consumers want fraud protection methods to be eliminated from the process. It is clear that customers want a secure service provider but they don’t want the transaction to be so full of friction that it takes hours or days. 

Fast onboarding and ease of use are the biggest drivers of the digital banking industry. Almost half of all consumers across the UK, Germany, and Sweden want quick onboarding times. 

While customers want stronger and more effective fraud control and prevention methods, they also want a quick process.

Growing Number of Authentication Methods

Only a couple of years ago, biometric checks were considered an uncertain method of authentication. Today, biometric authentication is the preferred method of authentication. 

Fingerprint verification ranks the highest when it comes to authentication methods. South Africans out of all the countries showed the highest preference for fingerprint authentication. Face scans and iris scans are also ranked among the other top 5 customer authentication methods.

Authentication using passcodes (One time passwords sent through banking apps or SMS messages) is still a highly ranked feature. The use of usernames and passwords is falling drastically, but they’re still an important part of multi-factor authentication.

This also suggests that there’s a growing suite of authentication methods allowing consumers to access their accounts and transact online. 

Conclusion

Consumers have a huge number of expectations of their financial service providers and the level of fraud protection they provide. Organizations have to strike a balance between alternative providers and completely frictionless experiences. 

Consumers are also aware of how relentless fraudsters are and they expect to be protected. As long as the friction is ideal for the circumstances and the level of risk is high, customers will be fine with additional verification checks. 

The key for providers is to understand that ID verification isn’t just about preventing fraud. It is also part of an organizational process. Great fraud protection provides consumers with a competitive advantage and it should play a major role.

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Due Care vs Due Diligence – Understanding the Difference

due care vs due diligence

Maintaining the integrity of online accounts is more than challenging in today’s time. Regulatory bodies keep writing more and more laws to help businesses keep themselves and their customers secure.

Financial institutions and FinTechs keep building cyber risk strategies to protect their customers from fraudsters online. This is one of the reasons why businesses need to understand the difference between due care and due diligence.

Understanding the difference between these can help financial institutions manage risk better.

What is Due Care?

Due care is providing just the right amount of care based on sufficient data available. Sometimes, due care is also defined as sufficient care, implying a person hasn’t been careless and hasn’t violated any laws.

Apart from legal terms, due care focuses on whether or not someone’s actions didn’t contribute to harm or violate the law.

In due care, organizations focus on whether or not a customer did something they were supposed to do. 

What is Due Diligence?

Due diligence has a significantly different meaning than due care. Due diligence focuses on what a reasonable person would do based on the type of situation they’re in.

What is Due Care in Cybersecurity?

Due care in Cybersecurity means taking reasonable steps to protect your business’s reputation, finances, and legal interests. Based on some most common cybersecurity frameworks, you can set some basic due care practices, such as:

  1. Know Your Assets

It’s impossible to protect devices and users that businesses don’t know exist. To ensure you’re taking the right due care steps, you need to catalog all these:

  • Data assets, including PII and IP.
  • Storage locations, including on-premises and cloud.
  • Devices include IoT devices, routers, and switches.
  • Your users.
  1. Build Your Custom Cybersecurity Policy

Every brand should have a cyber security policy to protect its users and themselves from online fraud. Before you write your policy, you should make a list of all the weak points in your organization. A risk assessment can help you build a policy that can prevent cyber fraud.

A great cybersecurity policy should outline the responsibilities of senior management and the board.

  1. Continuous Monitoring

Fraudsters love to evolve their techniques. They keep finding new ways to bypass security measures. To protect your organization from these developing measures of fraud, you need to continuously monitor the cybersecurity measures set in place. 

As a part of the process, you need to make sure your team also becomes aware of new risks and weak points in the system. 

  1. Build Incident Response Process

Cybersecurity risks can and will happen. Creating, testing, and reviewing your threat response process means you’re taking cyber security seriously. 

You have to make sure that the response team includes all the right people, and that there is a minimum response. 

  1. Create an Audit Trail

To protect your organization from risks, you need to build an audit trail. Almost every cyber security or privacy law requires organizations to undergo independent assessments of their programs.

What is Due Diligence in Cyber Security?

Due diligence in cyber security is the process of identifying cyber risks that come with third-party vendors. Due care means managing the risks your organizations have control over. Due diligence on the other hand focuses on managing risks that third-party vendors bring to your organization’s ecosystem.

To build a great due diligence process in cyber security, follow these steps:

  1. Identify Your Vendors

Vendor fraud is one of the largest types of fraud that businesses come across. Not conducting “Know Your Vendor” while vendor onboarding can lead to fraud risks. Use DIRO vendor verification technologies to verify:

  • Contractors
  • Cloud services providers
  • Operating systems
  • Applications

Having a full image of the process can help you prevent vendor fraud.

  1. Build Vendor Risk Management Policy

Similar to a cyber security policy, businesses need to build a vendor risk management policy. Your policy should include:

  • Defining appropriate controls
  • Setting metrics for measuring third-party compliance
  • Continuously monitoring vendor security posture
  1. Monitor Continuously

A primary part of vendor fraud management due diligence is knowing the potential security risks your vendors pose. Before you onboard a vendor, you should do a risk review that includes verifying vendor identity. 

Once you’ve onboarded vendors, it’s essential to ensure you monitor them continuously to ensure they don’t do anything they’re not supposed to be doing.

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Steps for Digital Transformation in Banking Industry

digital transformation in banking

Consumers’ expectations from banks are changing and the need for seamless and efficient processes is growing. Banking Digital transformation helps banks evolve and stay competitive. Most banks have a huge task ahead of themselves and they need to step up to customer expectations to stay relevant in changing times. 

As per data collected through a survey, 14% of US consumers were looking forward to changing banks, with 43% of customers planning to do so in the next 3 months. To retain customers and gain new ones, banks and financial institutions need to invest in digital and on-demand services. Customers who are on the market looking for a new bank will definitely prefer the ones that offer services beyond their expectations. This can be achieved by digital transformation in the banking industry. 

The financial services industry has been under huge turmoil in recent years, as tech companies have made subscription-based and on-demand services a normal habit. This unique environment has also entered the financial services industry. FinTechs have been filling the gaps that traditional banks lack. This newfound preference for FinTechs over banks is challenging for large financial institutions, as they need to innovate. This is why digital transformation in banking and financial services is becoming a necessity. 

Most financial institutions have started investing in digital transformation, and a lot of them are still struggling to keep their customers happy. In this article, we’ve mentioned the steps that banks can follow for successful digital transformation.

Best Steps for Successful Banking Digital Transformation

1. Leaders Should Focus on Innovation

Digital transformation in the banking industry requires huge changes and a cultural re-vamp. For innovation to be a major part of the industry, it needs to come from the top management to the lower level. Making this happen requires bringing in new leaders who have innovation experience.

To embrace digital transformation in banking and financial services, leaders should be the ones who try to implement innovative solutions the most. The innovative ideas should focus on long-term ROI and should help in building a lasting competitive advantage rather than attempting to avoid the short-term costs of making impactful structural changes. 

To make sure the innovative processes are working ideally, there are six areas to focus on:

  • Skills: Build teams that have the skills to adapt to new methods
  • Security: Gain customers’ trust by providing data security
  • Stability: Create resilience in IT systems to ensure that digital and online apps don’t experience downtime
  • Scalability: The solutions should be able to scale up or down to meet changing customer requirements
  • Speed: Focus on building multi-functional teams that can handle several projects at once and can reduce time.
  • Satisfaction: Make sure that customers are satisfied with the end product.

2. Unlock Data Framework

Software built-in in older times didn’t take data integration in mind. Keeping customers’ financial data in silos that can’t be easily accessed outside the company. This is changing as people want to access their money anytime, anywhere. 

With the digital payments apps of today, it’s almost seamless to send and receive to friends and businesses. If a particular bank can’t connect to these third-party payment services, customers will switch to a bank that can. 

Financial institutions need to invest to build better online customer experiences, financial institutions should invest in a centralized data-linking system. To get a data-linking system, financial institutions can either build one from scratch or choose a third-party vendor that can do the heavy work themselves.

3. Build Data Partnerships

Internal data is valuable, but it doesn’t provide the full picture of your customers’ financial lives. To offer the best products and services, you have to be able to access permissioned data from financial accounts they hold somewhere else. Up until recently, accessing consumer financial data from outside banks was next to impossible. But, in the last ten years, there are several technology companies that allow banks to do that. 

For retail baking customers, linking an external account is relatively simple. They select their outside bank and enter the username and password for those accounts. 

Data partnerships can paint the complete picture of a customer’s financial life, providing banks with the ability to build solutions that are able to keep up with customer demands. This can help in refinancing their mortgage at a lower rate or offer to target savings tips. 

In addition to data partnerships, banks can also consider relying on open banking API infrastructure that makes data sharing seamless. Partners like these can be a good solution for resource-limited banks that want to follow the digital transformation in the banking industry.

4. Recruit Technical Talent

Technical talent is critical for successful digital transformation in the banking industry. Without proper technical talent, financial institutions can’t build the much-needed solutions. 

Recruiting high-performing product managers, designers, and software engineers starts with building an innovative environment. Financial institutions aren’t exactly perceived as tech giants, so most technical talents don’t wish to work for financial institutions. According to a report, 50% of financial institutions say that they have challenges in finding IT talent. 

Fortunately, the culture is shifting, so banks need to offer enticing incentives for IT professionals. An ideal solution is to offer salaries that are up to par with top IT companies such as Google and Amazon. This may be the only way to recruit several tech workers and possibly the most effective solution.

5. Focus on Solving Customer Pain Problems

Once a bank gathers data and the people it needs, it can probably identify the gaps that digital transformation can fill. For example, a bank’s data team may need to find a significant number of customers, the problems they’re facing, and how to fix them. 

Addressing issues customers face can involve working with designers and engineers to build innovative solutions that can fix the pain problems. This is one of the biggest benefits of digital transformation in banking, as it focuses on improving customer experience.

6. Adopt a Product Mindset

Digital transformation in the banking industry isn’t a one-off process, it’s a continuous process. Ahead evolving customer expectations requires having a product-focused mindset.

Here are some of the key factors financial institutions need to keep in mind:

  • Identify a key performance metric to improve upon
  • Get to know the needs of your audience and the type of problems they’re facing
  • Figure out ideas on how to solve the problems for the target audience
  • Identify the top 3 ideas and build prototype solutions around them for testing
  • Measure the impact of those tests and evaluate their results.
  • Choose the most ideal process and implement it

7. Choose Carefully Between Building and Buying

Not every financial institution can shell out millions of dollars annually for seamless digital transformation. For most banks, the challenge is how to deploy limited resources in the most impactful way. To make the digital transformation successful, banks and financial institutions need to decide which solutions to build and which technologies to buy. 

Let’s say, if an institution has an amazing onboarding flow, they should build upon it and make sure that they boost the process. They can do this by updating their existing technology or getting third-party technologies such as online document verification solutions or other solutions to enhance the process.

Digital Transformation In Banking Can Overcome Consumer Problems

The financial services industry is changing and is soon to be disrupted by external factors such as FinTech and cryptocurrency. Under these circumstances, history has shown that only a couple of players stand tall at the end. Others either go out of business, get acquired, or slowly go toward the decline. The great news is that the standing players come out stronger than ever.

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Best Fraud Prevention Tips for Digital Currencies

digital currency fraud prevention

Cryptocurrencies and digital currency trading and exchange platforms have been becoming increasingly common in recent times. For the first time, investors and crypto enthusiasts entered the market because of the sudden boom in the value of Bitcoin. As cryptocurrency’s core nature is anonymity, financial institutions are becoming increasingly aware of a rise in money laundering cases. To minimize the risk of fraud in digital currencies, financial institutions need to follow the best fraud prevention tips for digital currencies.

The nature of cryptocurrency relies on exchanging coins online or via a phone or computer. This also means that payments can be made almost instantaneously and without many legal protocols. Credit and debit cards have legal protection, this allows you to dispute a payment and get your funds back in case of fraudulent activity. With cryptocurrencies, reversing payment isn’t possible unless the exchange itself has regulations regarding it. 

With the growing interest in cryptocurrencies, the rate of money laundering fraud is also increasing. There are also a series of third-party websites that offer cryptocurrency mining opportunities. The use of these sites will boost the growth of new cryptocurrencies and provide a base of credibility for upcoming currencies.

Digital fraud is also increasingly committed by tricking crypto enthusiasts and new investors into sharing their personal details including bank statements and ID documents to make an investment or deposit into a legit business. These stolen bank details can be used to deposit money out of a person’s accounts and move it into a fraudster’s behavior. 

Digital currency fraud including growing and well-known cryptocurrencies is becoming increasingly common. Plus, fraudsters are becoming increasingly sophisticated. This is making it harder for financial institutions to detect fraud.

We’ve come up with a list of the best fraud protection tips for digital currencies that can be followed by individuals and financial institutions.

Most Popular Online Scams

1. Social Engineering

Social engineering scams involve tricking customers into sharing their personal information. There are only two types of social engineering scams that you can find online including digital currencies:

  • Baiting Scams: Baiting scams include tricking customers by offering them something. The scams usually are based on impersonating an investment professional, a representative of a legit crypto firm, or a representative of a non-existent entity. Scammers tend to offer special rewards or extra earnings to trick customers into divulging their personal information.
  • Scareware: A scareware attack involves customers being tricked by false threats and alarms. If you’ve ever visited a third-party website, you must have seen a pop-up something along the lines of “Your Device is Being Attacked”. 

2. Phishing Scams

When it comes to the cryptocurrency industry, phishing scams trick customers into providing their information regarding digital wallets. Specifically, hackers are interested in crypto wallets’ private keys. Scammers will try to take control of customer e-wallets and encourage you to disclose your password or other authentication measures. A phishing email asking you to share your information regarding digital wallets.

3. Website Cloning

More sophisticated scammers are able to create a webpage that looks exactly like the original e-wallet website. Once you try to log in to the fake website the fraudster will have access to your information. Once you pay a little more attention to the website, you’ll find some inaccuracies. These types of sites can usually be identified by differences in the URL link.

How to Prevent Digital Cryptocurrency Fraud?

As cryptocurrencies are becoming increasingly popular globally, crypto exchanges have to comply with KYC regulations and AML regulations. Customers are required to complete thorough ID verification for consumers in order to buy and sell cryptocurrencies.

Here are the best fraud prevention tips for digital currencies:

  • Familiarize yourself with all the basic fraud prevention tips offered by your crypto exchange provider.
  • Check email addresses and contact names thoroughly before conducting any activity.
  • Make sure to not share sensitive data such as personal details, passwords, and card numbers with new sites.
  • Keep on the lookout for clone websites or website URLs.
  • Don’t sign up with crypto exchanges that don’t comply with KYC or AML regulations.

If you feel like you’ve been a victim of fraud, then the first thing you need to do is report it to the nearest authority.

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FinTech 2022 – A Brief Insight into Global KYC Regulations

kyc regulatory

Financial services globally are heavily regulated by regulated bodies. The number one concern of the government about FinTech companies is the growing rate of fraud. Over the years, FinTechs have achieved incredible growth and flexibility. They can launch new services quickly, focus on scalability, and adapt fast. Although, the rapid growth of FinTechs doesn’t come without its challenges. As technology is added to the finance sector, regulatory bodies have implemented stricter regulations. Let’s take a look at what these regulatory challenges are for the present state of FinTechs.

Major KYC/AML Regulations for FinTechs in 2022

In many regions, the FinTech sector was unregulated a couple of years ago and became the ground zero for scams and frauds. Because the FinTech industry is so vast, it impacts several industries and the authorities can’t develop a single approach to the problems. 

For many areas, governments worldwide have updated the existing Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. Some regulatory bodies have implemented FATF’s risk-based approach to tackle fraud. However, FinTechs are affected in numerous ways, so an industry-specific customer due diligence (CDD) approach is vital.

United States Regulations

FinTechs in the US aren’t regulated by any particular regulation. However, the firms are subjected to federal and state laws for registration, ID verification, and background screening is vital. The first fighter of fraud in the country “FinCEN” has issued a number of AML/CFT policies for FinTechs. The country’s FinTech companies have to perform customer due diligence during onboarding and submit Suspicious Activity Reports (SARs) to the regulatory body. 

United Kingdom Regulations

Just like the US, the United Kingdom doesn’t have any regulatory framework for FinTechs. However, any FinTech that offers traditional financial services, such as banking has to comply with the FinTechs set by regulatory authorities. If FinTech wants to operate in the UK, they have to get authorization from one of the UK’s financial regulators – the FCA (Financial Conduct Authority) or PRA (Prudential Regulation Authority).

EU’s Anti-Money Laundering Directive

The latest AML Directive (AMLD6) has a more profound impact on different sectors of the FinTech industry. From cryptocurrencies to wallet providers, AMD 6 has a far better influence and impact on fraud prevention across industries.

  1. Cryptocurrencies

Any platform that offers cryptocurrencies will have to go under tougher regulatory controls. All virtual currency exchanges have to register with the relevant authority, conduct necessary CDD protocols, and submit suspicious activity reports (SARs). Financial intelligence units (FIUs) have to maintain customer records with the name and address of the customer buying and selling digital currency.

  1. Prepaid Cards

According to the new AML directive, the limit for the prepaid card has been set between €150 to €250 and there’s a limit of €50 for online transactions. Additionally, cards are only allowed in the region unless a foreign provider meets the AML standards. Payments can only be accepted if the jurisdiction meets the AML standards.

  1. Beneficial Ownership

AMLD6 now requires all businesses to maintain publicly available and interconnected ultimate beneficial ownership (UBO) registries. National authorities will have access to these registries for trusts and bank accounts.

  1. High-Value Goods

High-value goods have been a part of money laundering activities for a long time. The use of high-value goods is now subject to new reporting requirements with updated thresholds. These goods include art, precious metals, artifacts, tobacco, and other items.

What FinTechs Can Do for Effective Compliance?

The FinTech industry is highly diverse and every sector has to re-evaluate and reform their customer due diligence programs according to the updated regulations. As a part of the FinTech industry you need to consider a few questions:

  • Are you complying with the country’s KYC/AML laws that you are serving in?
  • What customer due diligence protocols are you following as a business?
  • Is your customer screening process effective or is your drop-off increasing?
  • Is your customer due diligence process equally effective worldwide?

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Online Payments: Reinventing Customer Experiences

Online Payments reinventing customer experiences

The idea of the digital economy has been around for a long time, but the Covid-19 pandemic finally pushed the idea into a reality. Several businesses have made the idea possible by launching digital financial products and services. Before the pandemic, online payments were becoming highly famous among customers. Cash payments have been steadily declining since the year 2000, falling by around 10% every year, and the pandemic completely changed the process. According to industry experts, cash transactions will be eliminated in the next decade. 

However, traditional banking alternatives to cash still contain huge fees and inefficient practices. However, businesses are finding that traditional banking alternatives to cash aren’t equipped to deal with the modern instant economy and digitally demanding customers. 

Customers want a financial system that will allow them to send and receive money instantly and without much hassle. Leading more businesses to place more value on the online payment model. 

Open banking APIs allow businesses of all kinds to set up their own payment methods outside of traditional banking services. Open banking APIs leverage customer data, so they allow businesses to tailor build digital financial products and services for customers.

What are APIs and Their Value?

An API is software that allows two different applications to communicate with each other. One of the biggest and most common examples of APIs are food delivery apps or ride apps like Lyft, which offer customers an option for making payments inside the app. In the long run, it helps in improving customer experience. 

For the customers, the online payment process becomes fairly simple and it’s all possible due to APIs.

As the banks themselves aren’t equipped enough to handle online payments, this leads to slow payments, expensive transfer fees, and a completely inefficient process. After all, banks don’t have the technical prowess to handle growing customer demands. 

This is where open banking APIs come in. An API (Application Programming Interface) acts as a third party between accounts. APIs are specifically designed to offer a better online payment experience for customers.

Benefits of APIs

As customers are becoming more digital-friendly, they want more options for online payments. For banks and other financial institutions to keep up with customers’ demands, they need a seamless and secure payment method.

As traditional banking methods are expensive and inefficient, non-banks and FinTechs can struggle to find a payment infrastructure that can meet their customers’ expectations. Fortunately, open banking API can fix this problem by offering benefits such as:

1. Faster Payments

API software can support regulatory and operational tasks of plugging into payment schemes meaning that they can make online payments faster compared to banking methods. 

Businesses will be able to receive and make payments instantly, instead of waiting for days for a payment to be confirmed.

2. Faster Settlement & Reconciliation

APIs can make for better payment settlement, so accounts and debts are settled quickly. This means users are aware of their account activities at all times. This is coupled with faster reconciliation, so accounts show all the activities in real-time, ensuring better financial management.

3. Enhanced End-to-End Payment Experiences

The embedded payment feature reduces the need for customers to enter their financial details over and over again. APIs allow businesses to provide seamless online payment which can support customer needs. And, as the user’s accounts are never in direct contact with the bank’s servers, APIs offer an extra level of financial security compared to traditional payment methods.