Categories
Identity

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: 

  • Name
  • Date of birth
  • Address
  • Documents like passports, driver’s licenses, or national identity cards.
  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 verification of documents such as passports and driver’s licenses.

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.

Categories
Fraud

Can Strong Fraud Protection Bring in More Customers?

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.

Categories
KYC/KYB

Due Care vs Due Diligence – Understanding the Difference

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.

Categories
Bank

Steps for Digital Transformation in Banking Industry

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 the 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 for successful digital transformation that banks can follow.

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. To make 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 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 start 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 Problem

Once a bank gathers data and the people they need, 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 problem 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 require 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.

Categories
Fraud

Best Fraud Prevention Tips for Digital Currencies

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.

Categories
Fintech KYC/KYB

FinTech 2022 – A Brief Insight into Global KYC Regulations

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?

Categories
Finance

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 in fixing 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.

Categories
Compliance

7 Reasons to Switch to Compliance Apps instead of Cross-Border Manuals

Compliance is a word that’s thrown around leisurely in the financial services industry. Banks, financial institutions, FinTechs, and other businesses operating in the financial industry need to comply with KYC and AML regulations. For years, businesses have been relying on country manuals or handbooks that are jurisdiction-specific. These guidelines contain all rules and guidelines for businesses and financial services businesses. 

Handbooks are essential for legal and compliance teams, but you can also be a compliant business activity of wealth as asset managers, HR, Marketing, and even IT teams.

What Are Compliance Apps?

Compliance apps are tools for financial institutions that need to comply with KYC or AML regulations. AML and KYC directives keep changing frequently, so it’s hard for most financial institutions to keep up with them. They allow for faster compliance and decision-making and efficient knowledge sharing between internal parties, businesses, and other departments throughout the organization. 

Here’s why you should use compliance apps. 7 Advantages of Compliance Apps

1. Clear Guidance on Compliance

Compliance apps provide users with simple answers to confusing questions related to business activities abroad. The answers are visually pleasing and straightforward and provide answers for endless business scenarios. Compared to hand-held cross-country manuals and static text, compliance apps provide information in a much more consumer-friendly method. Compliance apps provide clear guidance on the information you require, which requires compliance time. 

2. Flexible & Scalable Coverage

Compliance apps can support the growing needs of businesses. With compliance apps, businesses can choose a variety of business scenarios and new countries and add as many users as needed to access the app. Compliance apps compared to country manuals can provide scalable information. Country KYC and AML compliance manuals can’t grow according to businesses. 

3. Immediate Answers Regarding Regulations

Compliance apps offer a user-friendly comparison between different cross-border scenarios on a single screen. It’s easy to find out answers to complex situations, which isn’t possible with country compliance manuals, and exploring cross-border situations often takes days. 

4. Compare Cross-Border Compliance Factors in Real-Time

Compliance apps users can compare compliance rules and regulations all over the globe in real-time without having to do tons of research. Easily find out where the circumstance best fits products and services. Cross-border country manuals can’t support exploring the comparison of scenarios.

5. Up-to-date Knowledge

By using compliance apps, banks and financial institutions can reduce the risk of missing out on important updates, and they’re automatically applied to the knowledge consumed by users on the app. If you compare this advantage of compliance apps with country compliance manuals, then these manuals need to be updated and distributed manually whenever any update comes in KYC and AML directives.

6. Facilitate Knowledge Sharing Internally

Compliance apps provide users with an increased chance of knowledge sharing among business teams with just a couple of clicks. Communicating with teams and sharing even the smallest of information becomes easy and quick. This can’t be done with country KYC and AML compliance manuals.

7. Answers Offered on Instrumental Level

Compliance apps offer business activities not for just one country, most of them provide insights on a product level, adding context and providing highly tailored guidance that all businesses and teams can benefit from. There is a certain level of complexity that country compliance manuals can simplify.

Conclusion: Advantages of Compliance Apps

Banks and financial institutions that don’t focus on compliance as much as they should tend to get fined. By using tools like compliance apps and online KYC verification software, banks and financial services businesses can improve their overall compliance process.

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Fintech

Challenges to FinTech Growth: Regulatory Compliance and Geographical Restrictions

When it comes to complying with regulations, FinTechs tend to face tons of trouble, be it KYC or AML. According to a survey, FinTechs all over the globe considers KYC and AML compliance one of the biggest challenges to FinTech growth. FinTech companies, regardless of their scale often face trouble with compliance. Let’s discuss all FinTech growth challenges and how they can prepare better.

FinTechs Regulatory Challenges Looking to Enter International Markets

There are a couple of challenges that FinTechs face while trying to enter other markets. Here are the biggest FinTech regulatory global challenges:

1. Expanding Digital Products and Services to Other Countries

FinTech companies such as Robo advisors and automated wealth managers run into lots of trouble while trying to enter new geographical markets. Apart from licensing issues, they also need to analyze and adapt to the needs of customers. This will depend on the customer’s nationality, domicile, and expertise, and will require acquiring knowledge of all customers involved. To do this, FinTech regulatory compliance needs to be followed thoroughly.

2. Offering Credit Cards in Other Countries

What are the requirements for offering free credit cards to a potential customer? There isn’t one perfect rule for all types of customers and every country. The requirements vary from country to country and these FinTech growth challenges. Understanding these rules can be challenging for small to big FinTech businesses.

AML Requirements for Onboarding Global Clients

Just like banks, FinTech needs to monitor and investigate suspicious activities. To make this happen, FinTechs require a robust risk management policy when it comes to onboarding customers from other countries.

Different countries have different AML requirements. One of the best examples can be the UK and Europe before Brexit, UK companies had to follow EU regulations for AML and KYC. With Brexit in place, financial services are now required to follow local rules and regulations for AML and KYC compliance. This is one of the biggest FinTech regulatory challenges.

This has led to the discontinuation of passporting across the EU, new implications for transferring and protecting data, and mandatory compliance with new regulations. If a company based in the UK wants to onboard a new customer in the EU, the company now has to acquire a license in an EU country and comply with the local rules and regulations of every country.

Benefits of Having Regulatory Answers

Regarding regulations, FinTechs have a tougher challenge to overcome compared to other types of startups. FinTechs have to penetrate a highly complicated and regulated market that acts as a hamper for growth. The best part is that there are endless benefits to being prepared to overcome FinTech regulatory compliance.

1. Scale Globally

For FinTech companies that want to enter cross-country markets, understanding the rules and regulations in every country is crucial for facilitating growth. It decreases the number of mistakes, enables the right partnerships, and supports a powerful growth that’s more calculated for growth.

2. Plan Strategically

Consumers will expect FinTech companies to consider and plan out financial regulations for growth. Consumers expect this because regulatory compliance can affect the business model, so it’s important to be strategic and plan. Based on the products and services, it makes sense to expand to one country rather than another.

3. Pick up Speed

One of the biggest FinTech regulatory global challenges is that the responses require a considerable amount of time even when they’re negative. The lengthy procedures reduce time in product development, expansion, and investment plans. 

Having the regulation answers ready via enterprise-ready solutions can bring down the time to reduce the market and cost of market entry.

Enhance Brand Value

In the end, it’s all about having solutions for regulatory compliance that decreases the risks of regulatory and reputational damage. Some FinTechs around the world are getting fined for not complying with regulations and it can hurt the brand’s reputation of the company.

The financial technology landscape world is still a new one, which means that the challenge to earning trust is higher. Being regulation-ready allows FinTech companies to stay compliant with KYC and AML regulations around the globe. 

Acquiring customers from other countries has plenty of challenges, and dealing with them remains a huge challenge for FinTechs. FinTech companies that aren’t prepared will spend significant time and resources on remaining compliant. 

With the right tools and solutions, FinTech companies can use regulation as a stepping stone for global reach. 

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Fintech

Affect of Financial Data Aggregation and Digitization on Mortgages

As the Covid-19 pandemic slowed down almost every sector of the financial industry, some markets are finally starting to make a comeback. The Australian property market is experiencing a major comeback, and house prices are rising at a record level.

This is the result of all-time low-interest rates and household savings that have accumulated to drive demand for property among first-time and veteran buyers. This is in line with this bullish housing market, home loan lenders have also started adopting digital services to make online customer onboarding faster and more secure. Companies like RBA Group have reported a rise in investment in technologies that are being made for streamlining the home loan approval process.

Barriers to Home Loans

The value of real estate in Australia has increased to $9.1 trillion, and it gained 1 trillion dollars in just five months, which was a whole new record for the industry. The unexceptionally high prices for the property are the primary barrier for customers to enter the Australian property market. More than 65% of all young people in Australia believe that it’s impossible to buy property in the Australian market. To fix this problem, innovative FinTech has started building products that can provide Australians with an opportunity to convert a portion of rent payments into equity payments. 

Not just FinTechs, other entities are also trying to help potential property owners. To protect borrowers and prevent risks in the home lending industry, the regulatory body “Australian Prudential Regulation Authority” (APRA) has issued a statement saying they will assess new borrower’s ability to keep up with their loan repayments at an interest rate that is at least 3.0 percentage points above the loan product rate. 

Industry experts believe this movement to be a first to restrain credit and housing markets, with the biggest shock for homebuyers to come in 2023 when the hike is supposed to decline by 5 percent.

Reducing Inefficiencies in the Lending Process

There are countless high barriers to entry in the property market, such as:

  • Going through the tedious and lengthy mortgage procurement process. 
  • Paper-based customer ID verification and bank verification can be solved with online bank account verification software.
  • Human error in the loan approval process. 

All these barriers make entry into the market for buyers extremely tough. Sometimes, the mortgage approval process can even take up to 50 days. 

With digitization, it is easy to streamline the application process, which makes it easier for approving mortgage applications. Data aggregation and innovation throughout the mortgage providers are trying to provide a seamless customer experience and speed up the process. 

By using technologies such as online customer document verification software, online bank verification software, or online KYC verification software, the customer verification process can be enhanced. 

Open Banking can connect a person’s banking data and lenders can get a clear picture of an individual’s financial history, which means the one who approves the application can make educated decisions. The process of deciding if an applicant qualifies for a mortgage should be driven by data.

With data aggregation and analysis functions, there is a huge opportunity to digitally transform the mortgage approval process. This can significantly reduce mortgage turnaround time and allow more people to get a mortgage.

Role of Digitization in Mortgage Approval

The recovery of the Australian property market after the Covid-19 pandemic has also boosted the prices of houses. The role of digitization is simple, it helps in streamlining the mortgage application process and makes it accessible for customers who’re looking for a mortgage.