Author: Ady

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Guide for Choosing the Best Online Document Verification Solution

document verification solution

Introduction

Your business has to verify a lot of customer identity using online documents, you choose a solution, integrate it with your systems, and now it’s time to go live and see how the solution performs. After deploying the solution, you can see that your customer onboarding number has taken a dip. Let’s say most of your customers are providing authentic documents for online identity verification, if they still can’t get through the verification process, then it’s time for you as a business to look into the problem. 

You start going through thousands of customer’s data and conclude that a huge number of documents are not supported by the document verification solution vendor. The reason could be that the document was recently issued by the government, or the document belongs to a country that the vendor can’t verify, or something else altogether. 

All you can do is confirm with your vendor, how long it will take till certain documents are supported? The waiting period can result in your bleeding business every day.

Foundation of Online ID Verification

Document authentication on Government-issued ID documents is the foundation of online identity verification. Customer IDs are verified using two key methods. The first one is using automation technology, machine learning solutions, AI-based technology, or optical character recognition. The second step is to verify documents using an army of expert document verification teams. The manual method of document verification is usually more time-consuming and prone to error. 

Understanding Document Forensics

  1. Cross-checking physical documents with online documents.
  2. Checking for minuscule changes in details, printing style, and other mismatched details.
  3. Verifying the information provided on documents with government databases.

Questions To Ask the Online Document Verification Vendor Before Choosing Services

As a business all set to invest in an online document verification solution, you should make sure to ask crucial questions. Here are the questions that are must ask:

  1. How many documents does the document verification solution support? How does the vendor measure the number of documents that have been issued by governments around the world? If a document has been issued twice by the government without any key changes, then does the vendor count that as two different documents or just one? How many countries does the solution support?
  2. The second question that you need to ask is how effective the solution is in verifying online ID documents? Can it detect all kinds of document tempering like physical, digital document forging, etc.?
  3. The last biggest question you should ask is how fast the solution verifies different types of documents. If a solution takes more than 5 minutes for each document then it would not be an effective solution for businesses with a lot of customer onboarding every day.

While these questions are highly important, there is one important question that businesses should ask their vendors:

  • What is the rate at which documents are verified or what is the document verification velocity?

This question you need to ask is because a lot of documents go out of circulation every year and newer documents are issued in return. It is important to know if new documents can be verified using the solution or not.

Right Kind of Document Verification Solution Can Make or Break Your Business

New document types are being issued by governments all over the globe, which makes the older document types obsolete. Any online document verification solution that can verify new and old documents in real-time is crucial for businesses to reduce costs and improve the overall customer experience.

What Makes an Online Document Verification Solution Great?

In the end, it all comes down to how the solutions are built, poorly built systems can easily be fooled by sophisticated fraudsters who employ better technological solutions. Online ID verification technologies that rely on only one type of verification can be tricked once the weak point is determined. As a business, it can lead to poor customer experience, and to make things worse, weak document verification solutions can cause your businesses to be susceptible to all kinds of fraud. Common examples of these frauds are money laundering, stealing, and embezzlement.

Ideal solutions are all about providing security and efficiency while cheap solutions are all about capturing customer data. Therefore, the perfect solution must keep adapting to new document types and change according to industry trends. Algorithms must be sophisticated enough not to fall prey to tactics used by fraudsters, they should also be able to learn by themselves or they should have comprehensive solutions that don’t require machine learning. 

If it’s possible, vendors should send unsupported documents for manual verification, while manual verification of documents is not ideal, it can still provide the solution needed by businesses. An online document verification solution should offer security out of all things. As businesses will need to verify a wide range of documents and confidential customer information, the solutions need to be secure and should not capture any information privately. 

Conclusion

As a business looking for an online identity verification solution or an online document verification solution, you need to ask a couple of questions. How many documents can the solution verify and what is onboarding velocity? How much time does it take to verify documents and how effective the solution is in figuring out the difference between authentic and fake documents? 

If you have been relying on manual methods for verification of documents, then you should ask the providers these questions and how well they work? Efficient document verification technologies can improve business operations and streamline the customer onboarding process.

About DIRO

DIRO provides a comprehensive online document verification solution. Our document verification technology verifies documents instantly, the technology can verify all kinds of online documents from all over the globe. DIRO’s proprietary solution blends technology and human touch to build a proper document verification solution. Our solution is effective in nullifying onboarding velocity. 

Businesses can use DIRO’s document verification solutions for fulfilling the KYC and AML compliance, improving customer experience, and streamlining the remote customer onboarding process. Verified and authentic documents are provided with proof of authentication. Authentic documents are also placed on the blockchain which makes them immutable.

  • DIRO’s HQ: (New York, USA)
  • Website: https://diro.io/
  • Email ID: (john.paul@diro.io)
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How MasterCard is Using Open Banking to Make Fasten ACH Payments?

mastercard

The payments industry is continuing to shift, and the latest technologies are bringing changes every single day. The switch from cash to checks and digital payments such as ACH has increased significantly. Especially in high-dollar or recurring payments such as rents and utility bills. These technological advancements provide a great experience for both merchants and consumers. Simply said, it provides better choices, simple experiences, and greater speeds when it comes to payments. But these advancements come with a couple of challenges. 

Unsuccessful transactions create unnecessary friction in the process and force customers to find new methods. And in some cases, it can cause customers and merchants to pay a penalty fee. There’s always a risk of fraudulent accounts or account credentials being used. 

To improve the process of these payments, Mastercard unveiled a new range of smart payment decisioning tools that help in reducing the friction of the process.

The new process named:

  • Payment Success Indicator
  • Payment Routing Optimizer

Rely on real-time bank data consented by a user to show payment indicators that raise successful payment completion rates and reduced transactional costs.

When it comes to ACH transactions, NACHA reported that the payment volume on the modern ACH Network increased by 7.7% in the third quarter of 2021. This shows that customers are responding positively to making direct payments from their bank accounts.

With the increased volume of ACH payments, there are a few challenges that may show the slow adoption of services, delaying the improved merchants and consumer experience. 

  • Settlement Risk: Lack of payment visibility leaves merchants exposed to potential returns, which adds friction to the customer-merchant relations. When a customer walks away from the payment process, the merchant of the surety of ACH Payments. This can increase the costs for merchants as it creates a costly return process. 
  • Security: At times, the merchant experience failed payments all because of a consumer adding fake or incorrect credentials. 

Payment Decisioning: Having multiple ACH payment options such as the payment rail and settlement date, provides consumer choice and minimizes expense. However, a lack of greater visibility can add risk to payment settlement.

Minimizing Payment Failure, Boosting Cash Flow

So how does fixing these pain points play out in the market? According to research done by Mastercard, every time an ACH payment fails a merchant has to pay some fee. Fraud continues to be a major issue in payments. According to a 2021 fraud survey, checks and wire transfers are by far the most preferred methods that fraudsters use to make money. In recent times, the ACH debits have seen an increase in fraudulent activities as well. 

Now add everything that open banking has to offer. By leveraging consumer-permissioned data, these challenges can be eliminated or reduced. 

With the new Payment Status Indicator, the risk of failure is reduced by scoring the likelihood of a payment going through even before initiating it. Then with Payment Routing Optimizer, payment originators are provided a recommendation for the most optimal payment day and payment rail to choose from. This increases the chances of a payment succeeding and offering great speed.

Better Data, Better Decision Making

With smart data comes better decision-making. This is true in almost every part of life, and it’s especially true in handling account-to-account payments. Leveraging machine learning and predictive modeling, Payment Success Indicator, and Payment Routing Optimizer can help in eliminating ACH payment failure. This can easily improve cash flow and improve the bottom line while creating a more positive experience for customers.

Customers are using more and more apps and services that leverage digital checkout and payment methods. It’s more crucial than ever to minimize fees and reduce costs, reduce the risk of fraud, non-sufficient funds, and returns and make payment settlement a cost-effective process.

By leveraging consumer-permission banking data, the Payment Success Indicator offers the payment originator a score out of 10 future calendar days, and individual scoring of each of these days. Scoring is based on real-time balance and historical behavioral risk patterns. This system is used to evaluate the likelihood that a given amount will settle successfully. 

If there’s a payment that has a high risk of settlement, or non-sufficient funds over a specific time period, then the merchant can use the information available to request an alternative payment method.

The analytics engine then provides a score separating the risk factors across 4 separate tiers, providing merchants with the advantage of maximizing available customer data. This helps in better decision-making. 

Here’s a breakdown of risk levels:

  • Tier 1: Highly likely to settle
  • Tier 2: Likely to settle
  • Tier 3: Less likely to settle
  • Tier 4: Do not process, Errors present

Each score includes weighted reasons for the scoring. Some common factors include:

  • Account balance
  • NSF history
  • Consumer spending
  • Consumer deposits
  • Other financial data

Payment Routing Optimizer will provide the payment rail, cost, and payment date suggestions based on the scoring provided by the Payment Success Indicator. 

The technology aims to eliminate the friction of the process of choosing between digital payment options with future updates of the Payment Routing Optimizer including a debit card option.

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Money Laundering Stats and Data

money laundering stats

Money laundering is known for making financial organizations fight hard for preventing crime. It has become a universal concern for regulatory bodies like the Financial Action Task Force (FATF), Financial Conduct Authority (FCA), and Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

Financial organizations have somehow succeeded in their fight against money laundering by creating stronger Anti-Money Laundering laws and regulations like ID Verification and background checks. These strategies are proven to be an effective fraud prevention solution.

This doesn’t mean that the money laundering situation has ended abruptly, the situation persists and remains a huge issue for the global economy. Money laundering cases continue to appear around the world. Here are some of the basic statistics stating the impact of money laundering on a global scale.

Common Statistics About Money Laundering

  1. According to a report by the United Nations Office on Drugs and Crime (UNODC), the average loss by laundered cash in one year is around $800 billion – $3 Trillion. Which is 2-5% of the worldwide GDP.
  2. Switzerland published 160 money laundering reports in 1989, with a monetary loss worth 330 million Swiss francs. Approximately $210 million in US currency.
  3. Regulatory bodies uncovered that Ferdinand Marcos hid almost $500 million in a series of Swiss Bank accounts.
  4.  The GDP of Switzerland is about 1/8th of the annual money laundered. That is $191,000,000,000.
  5. Dow Jones published that 1989 GDP had a score of 5% for money laundering. The amount ranging between $1 trillion – $3 trillion.
  6. A 1996 report published by Chulalongkorn University in Bangkok stated that the amount of money laundered in cash was equivalent to 15% of the nation’s GDP.
  7. The assessed GDP of the United States in 1998 was $8.511 trillion, which is triple the rate of multiple national economies.
  8. According to the Canadian Solicitor General, in 1998 the illegal assets created and laundered were around $5 – $17 billion. This is ironic because Canada is one of the biggest countries to follow and implement AML regulations.
  9. In 1998, the Swiss Finance Ministry affirmed that the nation was involved in $500 billion of money laundering every year. Switzerland is one of the biggest countries to contribute to global money laundering losses.
  10. The Republic of Ireland assesses that in 1998, $126 million were laundered throughout the country.
  11. In 1999, an illegal pharmaceutical deal was the reason for $48 billion in terms of money laundering.
  12. It is assessed that two-hundred million pharmaceutical clients intake almost $400 billion in laundered cash.
  13. In February 2000, General Motors turned over $161,315,000,000 which is almost 1/10th of money laundered annually.
  14. In 2008, banks paid up to $321 billion in fines for non-compliance with money laundering regulations, cyber financial fraud prevention, and market control.
  15. In 2009, worldwide AML guidelines were only 0.2%, as indicated by the UN and US State Department.
  16. In 2009, money laundering accounted for 3.6% of worldwide GDP with $1.6 trillion money laundered as indicated by the UNODC.
  17. FATF detected and blocked $3.1 billion worth of laundered cash in 2009 out of which more than 80% was seized in North America.
  18. In 2014, worldwide expenses on AML regulation-related fines was $10 billion. 
  19. In the year 2016-2017, 167 cases were documented for money laundering and illegal use of financial resources.
  20. The annual value of the Fraud Detection and Prevention market was assessed to be worth more than $19.5 billion in 2017.
  21. In the year 2017-19 in the UK, the legal fine for involvement in money laundering and financial fraud was £241,233,671.
  22. In the year 2018, India had more than 884 organizations reported on high alert for money laundering and illegal financial resources worth INR 50 Billion. The organizations are now being regulated under the Prevention of Money Laundering Act (PMLA 2002).
  23. In 2018, India was compliant with only four out of forty FATF-suggested regulations.
  24. According to a report by the Public Authority of India, around $18 billion is lost through illegal money laundering annually. This amount makes India a huge target for international money laundering.
  25. In 2018, the reported count of global money laundered cash washed annually was 2-5% of the global worldwide GDP, meaning $800 billion – $2 trillion.
  26. Florida International University was positioned in 9,500 Non-Banking Financial Companies out of 11,500 enrolled as a potential money laundering associate in 2018.
  27. In 2019, banks all over the globe paid more than $6.2 billion as AML fines around the world.
  28. Brazil became the nineteenth country with the least money laundering cases in 2019.
  29. For the last 2 years, Chile has had a laundering index of 4.16 thus making it one of the lowest money laundering indexes. 
  30. Haiti became one of the largest Caribbean countries in 2020 for money laundering in Latin America, with a money laundering score of 8.15 according to FATF.
  31. About half of cases of money laundering in Latin America show that banks were involved in these cases. 
  32. In 2020, Cayman Islands had an index score of 7.46 for money laundering, in the same year, Chile became the lowest ranking country.
  33. Iran is still at the highest point of the Anti-Money Laundering hazard file with a money laundering index score of 8.6. Afghanistan comes second with a score of 8.38 and Guinea-Bissau is third with a score of 8.35. 
  34. Money laundering accounts for about 1.2% of the European Union’s entire GDP.
  35. Russia has illegally laundered more than $15 billion through fake or paper bank accounts. 

Conclusion: Money Laundering & Its Impacts

Money laundering has been a major worldwide issue and it will continue to become even a bigger threat if the right regulations aren’t followed strictly. The annual losses by money laundering are equal to 2-5% of the global economy.

Banks and financial institutions need to follow AML regulations set up by international financial associations. While banks, financial institutions, and governments keep searching for newer and stronger methods for tackling financial crime, till then anti-money laundering regulations are the most successful solution.

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Banking-as-a-Service (BaaS) Revolution

baas financial tech

Traditional banking is extremely limiting, and it requires users to go through a lot of hoops. Opening a bank account, applying for loans, or any other thing forces users to go to a physical branch. Fortunately, the recent wave of modernization in the banking sector is all set to change the traditional norms. 

Today, banking services are available digitally to most users. While currently, they’re available as an accessory to traditional banking services, innovative solutions will change that soon. Several FinTechs out there are enhancing banking user experiences for customers.

The digital movement is providing consumers with more financial freedom and options. Customers can build their financial lives as they see fit, and Banking-as-a-Service (BaaS) is making it all happen. Customers can now turn to innovative solutions that offer niche solutions that cater to the business’s needs.

However, building a new FinTech company, app, or product from scratch is a complex process. The traditional method of creating financial services was a long and hard road. BaaS platforms and platforms and technology solutions provide the building blocks necessary for a FinTech or Neobank to quickly start creating innovative financial use cases for the consumers of today.

Modernizing the Banking Solutions

To offer a banking service, entrepreneurs need the help of emerging BaaS platforms that can help them enter the industry. Whether an entrepreneur is facing challenges in issuing cards, sending ACH payments, or more basic financial operations, developers can take these blocks and reassemble them to meet their needs. 

The key to building FinTechs with a BaaS provider is having just one API that’s super easy to connect with. This reduces the architectural and modeling needs of the FinTech development team. These tools allow FinTechs to onboard new customers with ease and without delays by using a series of verification solutions such as online document verification. 

Another reason to rely on a BaaS provider is that it’s easy to make changes using an API if you’re using multiple solutions. If a company has been facing problems with their customer verification solution they can easily and seamlessly replace it with a better solution. This makes scaling up or down easy and a hassle-proof process.

BaaS Providers: Offering a Plethora of Options

BaaS includes all the digital banking services, including those developed in-house and those developed outside. Most BaaS providers offer a single API marketplace to make it easier for FinTechs to launch everything simultaneously. 

FinTechs with limited resources can sign up with a BaaS provider instead of relying on FinTech developers, which leads to fewer overhead costs.

Working with a BaaS provider allows FinTech builders to focus more on the features they want to offer and less on the development side. The marketplace solution means that FinTech can rely on multiple solutions at the same time, if one fails they can move on to the next one.

Why Fraud Detection and Speed Are Crucial?

It’s understandable that the risk, compliance, and customer experience need to have a balance. FinTechs can’t compromise on fraud prevention solutions. By adding open banking data to the BaaS platform, financial service providers can verify and access bank account data with DIRO bank account verification. This helps in ensuring that the person opening the account actually owns the account and that all the information provided by them is true. 

Speed is another concern for upcoming FinTechs as consumers want a lightning-fast experience. As banks are not tech companies, their knowledge of tech and the ideal customer experience is limited. COBOL, a programming language developed in 1959 is still used in multiple banking systems and this makes it tough to upgrade the banking systems. 

This can result in a speed mismatch between banking networks and the world of FinTechs, who want to be able to release new products and services in a few weeks.

There’s a lot of new technology being created to improve the financial experience for customers all across the world. These FinTechs also need to rely on world-class technology that can offer brilliant customer authentication solutions for a reduced level of fraud. This is where DIRO identity verification comes in.

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5 Best Ways to Protect Businesses From Cyber Attacks

best practices for cyber attack fraud prevention

Businesses of all kinds have an obligation to try and protect their users. Protecting users from cyber attacks is a responsibility that every single business has to take on. Your existing and new customers need to know the best practices they can follow to stay protected. With bad actors becoming more and more creative, you need to be more vigilant and teach your customers to protect themselves from cyber-attacks. 

In this guide, we’ll outline the best 5 ways to protect users from cyber attacks. Let’s dive in.

Best Cyber Security Practices

Even the smallest of mistakes can cost you very dearly if you don’t pay attention online. There are some basic things organizations can do to protect their users and their data. If a hacker or bad actor can gain access to confidential information, it can cost your business millions of dollars. Here’s how to stay safe online:

1. Learn How to Detect Attacks

Cyber attacks can come in any shape and size. They can be in the form of phishing, ransomware, or pretexting. Out of all these attacks, social engineering attacks are the most dangerous and hardest to figure out. Organizations should have the ability to detect them as soon as possible. 

Every single member of your organization should learn how to detect social engineering attacks. Anyone who clicks on the wrong link or sends personal information to the wrong person, it’s an invitation to a data breach. 

Here are some of the most common methods used by bad actors during social engineering attacks:

  • Requests for the user or shared credentials
  • Request for financial or contractual information
  • Requests for user personal information
  • Unusual or suspicious links and files
  • Unusual or suspicious phone calls

2. Educate Users about Devices

To protect your users from cyber attacks, you need to educate them on some things. It helps in ensuring that every member of your organization is aware of the best practices to protect themselves. Businesses should also hold seminars after employee onboarding to prevent cyber attacks.

Whenever your employees leave their desks, they should always lock their devices. Also, setting up personal passwords goes a long way in fraud prevention. You should educate users and refrain from using third-party apps that aren’t trusted.

3. Multi-Factor Authentication and Password Management

If you’re storing user data, and your users can log in to your website, then it’s essential to use multi-factor authentication methods. While a password helps in protecting you, MFA just adds another layer of security for the users and the businesses.

Make sure that all the employees and users change the default passwords as this is one of the biggest ways people get exploited. Also, never ever share passwords. MFA is a key to securing your devices and systems, as it forces the user to verify their identity. As the user has to provide a unique numerical code after entering the username-password, it prevents the risk of credential stealing.

4. Keep Up With Software and Hardware Practices

Software and hardware physical security practices can help ensure that you’re doing all that you can to keep your business secure. It can be anything, from using built-in defense functions or regularly updating software and hardware.

Choosing systems with built-in layers of defense boosts your organization’s cybersecurity the minute they’re running. There are endless solutions containing built-in security functions including data encryption and endpoint protection, these obstacles make it harder for bad actors to access your systems.

When it comes to software updates, most businesses and users ignore their importance. Prioritize updating the software and firmware on all the devices, as this allows them to function at an ideal level.

5. Choose the Ideal Technology

Finding a technology provider that offers all the solutions you need, all the while operating while being transparent isn’t easy. It may take some time to decide which vendor is the right fit for your business. 

Most vendors offer their customer hardening guides, these guides teach users how to keep their devices secure.

Choosing the ideal technology is crucial to a strong cybersecurity strategy. This also includes using the right technology for customer onboarding. DIRO online document verification technology can boost the onboarding process and eliminate the risk of fraud.

When you onboard the right type of users, you automatically reduce the risk of data breaches, account takeover fraud, and so much more.

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Steps Payment Gateway Can Take to Detect and Prevent Online Fraud?

payment gateway fraud prevention

When you have started your online business, you wouldn’t consider online fraud as a challenge when you’re processing less than 10 transactions a day. However, when your business and the number of transactions increase, you need to be more careful. Statistics state that in 2018, US merchants lost an estimated $6.4 billion in payments card fraud. Small businesses especially face the highest number of frauds and an estimate of $155,000 per year.

Credit card processors offer merchants basic security measures to reduce the risks of credit card fraud. Although some merchants don’t offer seller protection, including PayPal, this is the case in the case of digital goods. You can decide which payment gateway to use. This also tells how your business will be protected in case of fraud transactions.

With the digital goods and services landscape on a boom, businesses of all sizes need to re-evaluate their position and tools when it comes to fraud management. In this article, we will take a look at the most effective techniques when it comes to tackling card payment fraud.

How to Prevent Payment Gateway Fraud?

1. Address Verification Solution

Address verification solutions are used to detect online fraud. When customers purchase items, they have to provide their billing address and ZIP code and address verification solutions check whether this address is real or not. Part of a Card-not-present transaction, the payment gateway can send a request for user verification.’

2. Card Verification Value (CVV)

The CVV or Card Verification Value is a 3 or 4-digit code on credit cards. The code should never be stored on a merchant’s database. A CVV filter acts as an added security layer, allowing only the card owner to use the card. If an order is placed on the website and the CVV doesn’t match, the transaction should not go through. While making a CNP transaction (online, email, or telephone orders), merchants get the required information from the customers.

3. Device Identification

Device identification analyzes the computer instead of the person who’s visiting the website. It verifies the internet service, and browser to see if the transaction has to be approved. All the devices (phones, computers, tablets, etc) have a unique fingerprint, similar to human fingerprints. 

Fraudsters are unable to impersonate a computer’s unique identity, making it a viable option for your business against online payment fraud.

4. Flag Large Transactions

With stolen card information, fraudsters will take a shot at making transactions before the card is blocked. This would be harmful to your business where you’ll have to take on the cost of allowing fraudulent transactions to take place. Constant instances of fraud can lead to payment processors terminating your processing account.

You can easily limit the number of large transactions by specifying a flat amount. In addition to this, you can limit the number of failed transactions.

5. Payer Authentication (3-D Secure)

Payer authentication, sometimes called Verified by Visa (VeB) and MasterCard SecureCode, is a cardholder authentication measure that secures all online transactions for customers. This method allows cardholders to create a PIN that can be used during checkout. By using payer authentication, merchants are offered chargeback protection and lower interchange rates. 

This is one of the most sought-out fraud prevention tools that businesses rely on. 

6. High-Risk Countries

If you’re sending products overseas, then you need to exercise greater caution for these orders. Pay more attention to orders that come from high-risk countries. Customers in these countries need to be verified by the countries before the transactions are processed. 

According to the online fraud guide, some of the highest-risk countries include Israel, Malaysia, Egypt, Pakistan, Ukraine, Russia, Bulgaria, Romania, Lithuania, Nigeria, and Yugoslavia.

7. Risk Scoring

Risk scoring tools are based on statistical models designed to recognize fraudulent transactions based on a number of rules and regulations. When a payment is done on your website, the risk scoring tools will indicate the probability of the transactions being fraudulent. A higher probability of a transaction being fraudulent means that you should verify the transaction.

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FinTech Compliance: Are Sponsor Banks Responsible?

fintech compliance

While FinTechs are now offering transactions as part of their service, they aren’t exactly banks and maybe that’s the reason they don’t have as big of a user base as they should. To grow themselves, they partner with a sponsor bank that moves the money between parties. This strategy allows FinTechs to focus on providing better services without them having to jump through hoops and become an official bank.

The sponsor bank is responsible for complying with anti-money laundering regulations and takes on the risks for customers and transactions under the FinTechs. The sponsor bank has to ensure that the FinTech they sponsor has a strong compliance program set in place. There must also be a seamless process for FinTechs to report any suspicious activities. The bank’s own compliance department can investigate and file suspicious activity reports (SAR). 

In January 2021, the OCC (Office of the Comptroller of the Currency) filed a complaint against “M.Y. Safra Bank” located in New York. The OCC found that they didn’t have an adequate compliance program in place, and when they became a sponsor bank for a FinTech, they failed to give proper consideration to the Bank Secrecy Act (BSA). Specifically, it failed to implement controls to keep up with the increased level of risk, while the bank wasn’t fined, they were ordered to cease and desist.

General Considerations While Building FinTech – Bank Compliance

Different financial services are subject to various laws and regulations, and a FinTech looking for successful bank partnerships needs to make some considerations.

1. Developing a Business Plan

The first step in offering financial services is the development of a business plan that covers the operational, legal, and regulatory guidelines. It is important to remember that even under a bank partnership model, certain states may require loan brokers, lead generators, loan services, and more to be licensed. 

2. Developing and Implementing a Compliance Management System

FinTechs will need to develop and implement a compliance management system, and a comprehensive and integrated compliance program containing written documents, functions, processes, and tools. These can help FinTech comply with legal requirements and reduce consumer harm resulting from violations of law. 

These types of policies are needed will depend on the nature of services offered by FinTechs.

3. Preparing to Partner

Once FinTechs develop business plans, a FinTech seeking to partner with banks needs to define the partnership goals. What does your business want from the partnership? Does FinTech want to own the customer relationship process or data? Does FinTech expect to diversify its business to include additional products moving forward? Not only should FinTech perform diligence on the potential bank partner, but it should also prepare for the bank to perform significant diligence. All of this allows FinTechs to have more control over the direction of the partnerships.

4. Finding the Ideal Partner

The key to finding success in any partnership is for both partners to find the right partners. When it comes to FinTech-bank partnerships, that means finding a bank that has ideal resources, knowledge, and flexibility. 

Similarly, a FinTech active in the small business credit industry may want to work with a bank partner with existing commercial credit programs. Once FinTechs find the right experience has been identified, it’s important to assess the bank’s pricing and ability to scale and help businesses grow.

5. Negotiating Service Provider Agreements

In many cases, a FinTech will need to work with other service providers to its bank partner to provide its proposed financial services. This can include executing contracts with service providers for AML screening, collection services, and call center support. These relationships must be established within the framework of the bank partnership model.

Conclusion – FinTech Compliance

If a bank wants to be in a partnership with FinTechs, they have to ensure that those businesses have strong compliance programs. The internal policies must include transaction monitoring and customer due diligence programs. FinTechs should also have ways to detect and report suspicious activities. This allows the banks to keep up with their regulatory obligations. 

FinTechs aren’t regulated and the sponsor bank is the regulated entity to take care of the risks. By using technological solutions such as DIRO online document verification software, FinTechs can achieve industry-wide KYC and AML compliance.

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Guide on Real-Time Payments and Verifying Account Identity

real time bank account verification

NACHA, the Electronic Payment Association overseeing the ACH network, recently made some changes to its Operating rules regarding ACH payments. Based on the new rules, originators or WEB debit entries are asked to use a “commercially reasonable fraudulent transaction detection system” to verify users for fraud. Beginning on March 19, 2021, the rule will change to explicitly require “account validation” or “bank account verification” to be part of the new fraud detection system.

Payment merchants who don’t already have bank account verification technologies in their fraud detection systems need to add them. They should also educate themselves about the rule changes and find ways to comply with the new regulation put out by NACHA. There are tons of educating yourself about the guidelines and how to make sure you’re complying with the regulations.

Bank Account Verification and Fraud

The changes in NACHA rule changes come as faster payment services, these include NACHA’s Same Day ACH. Ever since Same-Day ACH Payments, it has just seen an upward growth. For example, in 2017, Same Day ACH volume exploded by 137% to $159.9 billion in total payments. Although with faster payments, there’s also an increased risk of payment fraud.

“As the adage goes, with faster payments comes faster fraud, so implementing preventative measures upfront to identify fraudulent activity before it is set in motion is receiving the most focus,” said Sarah Grotta, director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.

“When transactions occur within seconds instead of hours or days, there isn’t the time to assess the transaction itself, so ensuring the validity of the account is critical.” Says Mercator Advisory Group.

As bank account verification is crucial, NACHA is making it mandatory for every single ACH transaction. When the changes finally take effect, any and all payment merchants that process WEB debits will need to have a bank account verification solution. All the merchants that use the ACH network will have to comply with this rule. Everyone that originates WEB debits, regardless of business size or industry they’re operating in will have to abide by these new rules. 

As millions of companies across thousands of industries use the ACH payment network, a whole range of use cases may be impacted by the changes in the rules. Here are some of the key payment examples that rely on ACH payments, especially if account information is collected by the originator:

  • Insurance company payments
  • Contributions to individual retirement accounts, SEPs, 401Ks
  • POS purchase
  • Utility payments
  • Tax payments
  • Charitable donations
  • Installment loan payments, including car loans, credit cards, mortgages, HELOCs
  • Membership payments

Account Verification Solutions in Real-Time Payments

Fortunately, the merchants who need to change their fraud screening services can leverage a lot of solutions to be compliant. However, not all the solutions are good enough at stopping fraud or working when it comes to real-time payments.

This is crucial because even if NACHA didn’t change the rules, merchants would be wise to take the account verification process seriously.

One method is ACH prenotification, also known as a prenote. It is a zero-dollar transaction that an originator sends to the issuing company before an actual debit or credit card. The goal is to validate the routing and accounting number at the issuing bank prior to sending through the actual transaction.

Although the prenote is effective at verifying the account number, it doesn’t offer any information about the account itself. It also takes up to three days, making it ineffective for faster payments.

There’s another solution for bank account verification is DIRO online document verification solution. DIRO can verify bank account information using bank statements in real-time by cross-referencing information from the issuing source. DIRO bank account verification solution can be the perfect tool for real-time account validation with faster payments.

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Verizon 2022 Annual Data breach Report

verizon data breach report 2022

The 15 year old tradition is still standing strong with this week’s DBIR Annual Report. In the latest data breach report, Verizon highlighted their analysis of over 5,212 breaches and 23,896 security incidents to find the most common trends used by fraudsters. The 4 most commonly used methods include enterprise estates, credentials, phishing, and exploiting vulnerabilities.

In the report, it was stated that the hackers prefer to exploit the human element (errors, misuse, and social engineering). By combining these elements and the entry points above, hackers find access to organizations and begin stealing data. As a matter of fact, Verizon Data breach report states that 82% of all breaches this year were because of the human element. Human elements can be anything, including errors, misuse, and social engineering. 

Other factors were also included in the high number of data breaches, including:

  • 45% were related to credential resume
  • 25% of breaches were due to social engineering
  • 50% were related to remote access and web apps

Verizon’s 2022 Data Breach Report – Takeaway

The core of this year’s data breach report was that the weakest link out of all are humans. The reason for that is simple, it’s because users continue to click on malicious links, and they continue to lose or hand out their credentials. Users all over the world are making the same kind of mistakes that hackers love to exploit. This is what provides hackers the back passage to sensitive systems of a business. While humans are making mistakes, it’s not a surprise as humans are bound to make mistakes. If these reports are scaring you, then worry not, it’s not all bad news, because you can always find ways around this problem.

While eliminating the human element from this equation sounds challenging for businesses, there are other options as well. Verizon recommends the usual approach can reduce usual approach to reduce some challenges, such as two-factor authentication and/or implementing password managers for users, all In an effort to avoid the impact credentials introduce. 

Using this approach, you can reduce the likelihood of attackers being able to exploit poor passwords to gain access to applications,  systems, and data. These capabilities have been available online for use, but the number of data breaches is increasing every single year. 

Let’s focus on credentials for a moment. Why? If you do a quick search for credentials in the report, it appears over 86 times. With that in mind, the report suggests, “unfortunately, if you can access the asset directly over the internet by just entering credentials, so can the criminals.” If we can improve on authenticating users without the use of usernames and passwords, then organizations can reduce the risk of data breaches. 

Another way to reduce the risk of data breaches is by onboarding customers smartly. With DIRO online document verification, businesses can streamline their KYC and KYB verification processes. 

With smarter customer onboarding practices, organizations can save time, money, and effort. DIRO offers a range of verification solutions that can be used for:

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Best Payment Options for an Online Marketplace

online marketplace

The marketplace economy is booming and it is becoming a very profitable industry. Currently, Amazon sells more products online every minute than any other store in the world. Now, think of the millions of other marketplace websites online, and how much revenue they generate every single day. It’s safe to say that online shopping has become our primary method of shopping.

Online marketplaces are websites or apps that connect buyers with sellers, and they offer a great level of convenience for the customers. Marketplaces act like the middleman, providing customers with the products they need by procuring them from the sellers. They charge a certain amount to provide this service. The amount of products that are being sold online has turned “marketplace payment processing” a hot topic. While the “storefront” style of eCommerce stores is still going strong, the changes in technology have provided new methods to connect buyers and sellers. Niche marketplaces are continuing to grow and will keep doing so in the near future. 

With customers spending almost $16 trillion in the Q3 of 2021, it’s more crucial now than ever to integrate payment processing solutions. These can lead to affordable, reliable, and secure collection of funds from customers. Account-to-account payment solutions like ACH, push-to-debit, and real-time payments offer businesses a great way to process payments. 

Instead of relying on outdated methods of payments like cards or paper checks for marketplace payment processing, account-to-account payment processing provides a better advantage to online marketplace owners.

Steps to Improve Marketplace Payments

Every single online marketplace needs to find an ideal platform for online payment processing. Online marketplaces need to have online payment processing methods to run as smoothly as possible when it comes to handling customer payments. 

Marketplaces are constantly accepting payments from buyers and paying their merchants. This is why it’s crucial to have a smooth payment process. But with an unsuitable payments integration. Without it, you may not know about unnecessary charges on both sides of the transaction. If you want your online marketplace to succeed, then you need to collect payments as smoothly as possible.

Important Aspects of Marketplace Payments

You need to make sure that the buying experience for customers is as smooth as possible. The ideal account-to-account payment solution builds a brilliant user experience and allows them to buy whatever they want.

The online marketplace user experience can be broken down into 5 main elements:

  • How easy is it for users to accomplish easy tasks
  • Once the user understands the design, how quickly can they perform a task?
  • Whenever a user returns, how easily can they reestablish proficiency
  • How many errors do the user makes, how severe do these errors are, and can customers prevent from making these errors?
  • Is the design pleasant to use?

Marketplace Payment Processing Options

1. Credit Cards

The first and foremost method should be credit cards. This is because of how commonly they’re used by customers all over the world. Accepting credit cards during the payment part is pretty common. Cards are available everywhere and they provide a convenient user experience for the consumers. Although, these cards are expensive for marketplaces. Most marketplaces tend to increase their prices to keep up with these costs.

2. ACH Payments

ACH payments can get rid of the mailing and managing of paper checks by sending funds from bank to bank accounts. This can reduce the time and cost of making payments for online marketplaces.

As online marketplaces collect payments from buyers and sellers, they need to have a simple monitoring process. ACH Payment integration can help in managing data in an easy-to-use format by monitoring transactions and reporting issues. Online marketplaces need payment service providers that allow businesses to operate smoothly, instead of slowing down the workflow.

3. Instant Payouts to Debit Card

Instantly send money to debit cards with push to debit payments. Online marketplaces can use these payment methods to combine the speed of card transactions and the affordability of account-to-account transfers. Marketplaces businesses want to receive payments quickly and this is a great way to do so.

4. Real-Time Payments

One of the newest payment standards in the United States is the RTP Network which is owned and operated by The Clearing House.

Real-time payments can be initiated at any time of the day. These are balance-sourced account-to-account payments that clear and settle near instantaneously.

How to Secure Payment Process?

While it is important to have a seamless payment settlement process, it is also crucial to make sure that the process is as secure as possible. The online marketplace can reduce the risks of payment fraud by verifying payment merchants before onboarding.

DIRO online document verification solution can be used by online marketplaces to verify online payment processors. This can help in reducing chargeback fraud, and other types of payment fraud.