Categories
AML

Money Laundering and Wash Trading in NFT – Taking a Deeper Look

Wash trading is becoming common practice for a number of reasons. The trader or company may be trying to promote buying to raise prices, or to get people to sell at lower prices. The real reason is that the trader wants a tax refund whenever they engage in wash trading. This helps them in collecting capital so they can perform the same activities over and over again.

Understanding Crypto Wash Trading

In layman’s terms, Wash trading is done to trick and mislead traders, investors, and collectors about the true value and liquidity of a coin or NFT. Any trader or investor that does wash trading buys and sells the same asset over and over again.

Wash trading is impacting the market in the favor of the NFT owner/developer as it changes the actual value of the account. Wash trading requires the trader to quickly purchase and sell an asset in a short time period. Usually, one or more collaborating agents make multiple deals without any account of market risk. This makes the initial position of hostile agents the same as before.

On the Ethereum Blockchain, “Cryptopunks, a Larva Labs NFT Project”, went through a wash sale in October 2021. CryptoPunk 9998, crypto was sold for 123,457 ETH.

This was not just a flash loan, but it was an example of NFT money laundering.

How Does Wash Trade Work?

The Constant buying and selling of a crypto coin or NFT are known as wash trading. The concept of Wash Traders goes one step beyond, and it also considers the investor’s goal and outcome of the transaction into consideration.

Investors or traders that buy and sell assets with a common benefit in a short time period are engaging in wash trading. Traders across accounts with the same Beneficial Owner are a concern for financial regulators as they may be involved in money laundering. 

To trick regulatory bodies and manipulate the market, some wash traders don’t include any actual transactions. Wash trading can also happen when traders pretend to buy the assets without any money being exchanged.

Why Is Wash Trading Forbidden?

In traditional financing, wash trading is considered illegal and forbidden. When it comes to the decentralized NFTs, whether Wash trading is illegal or not is not defined yet. 

Even though there are no rules and regulations in the world of NFTs, several governments have established oppressing rules. For example, a South Korean crypto exchange “Bithumb” was charged by the government for promoting the wash trade. This trade was worth more than $250 million back in 2018. 

While crypto wash trading isn’t considered illegal in some countries, it is a challenge to figure out the offenders. This is due to the decentralized nature of the crypto and the NFT industry. Due to the anonymous nature of coins and NFTs, they can be purchased and sold repeatedly. This increases the risk of wash trading and money laundering. 

The risk is increased with fake prices and fake volume data. There’s no way for legit traders to uncover valid data until regulatory bodies in which countries or regions overseeing particular assets get involved. This is completely different from traditional financial trading assets such as equities, which are backed by customer verification protocols.

Role of NFTs in the Money Laundering Process

Money laundering is a huge concern when it comes to art trading. As NFTs are anonymous, many people question if NFTs can be used for money laundering. So, the question arises, can NFTs be used for money laundering?

The answer is Yes. Developers and scammers are using NFTs to launder money. As NFTs have an advantage over traditional banking methods, there is a lot of use of crypto assets for money laundering. 

As it’s difficult to quantify money laundering in the worth of physical art, NFTs don’t have that problem. NFTs provide a better idea of how much money is being laundered. Recently, most NFT marketplaces have become a hub for money laundering.

Why does Wash Trading Affect the NFT Market?

The reason is simple: traders use less liquid NFTs to affect an asset’s price. NFT Wash trading is a major issue for legit investors, the general public, and collectors. 

As investors have to rely on quantifiable data to make a decision, most of them end up making the wrong choices. Specialists have to look at data changes to promote NFT Investments and prevent the Wash trading scams. The NFT community is most riddled with scammers. Wash trading is becoming a common practice that regulators can use to fight the decentralized nature of the Crypto space. 

Due to wash trading, traders and investors are unable to make smart and informed decisions about their purchases. So, is there a way to identify wash trading in the NFT market?

When new coins are released in the market, they’re completely fresh and have no old data. Thus, developers and insiders may perform wash trading to boost the value of the coin. So, it’s better to stay away from such digital assets.

When it comes to NFTs, limited NFTs have investor interest or trading activities. So, the NFT owners get into wash trading to entice new traders to buy the NFT at an enormous cost. 

To not fall prey to wash trading scams, a trader should always focus on established crypto with higher volume. Scammers need more money to effectively manipulate the market. So, avoiding new currencies can prevent them from doing so.

Categories
Bank

Micro Deposit Verification for Bank Accounts – Alternatives to Micro Deposit Verification

Micro deposits are the legacy system for the verification of customer bank accounts. As far as customers could remember, banks have been using micro deposit verification to verify bank account ownership. But being one of the oldest and most used methods doesn’t mean that it’s the perfect solution. There are some flaws in the micro deposit bank account verification process.

Micro deposits are two small test deposits that are sent from one bank to another one. The idea is that it helps in verifying second account ownership information.

The micro deposit bank account verification process can easily take up to 5 business days as the transactions go through the ACH Network. In a world where consumers want instant process completion, waiting for 5 days can increase the abandonment process.

Why Micro-Deposit Account Verification Is Used for Account Verification?

The current banking infrastructure is decades old, and it takes a lot of time and money to upgrade. Since the beginning, the account verification process revolves around micro deposit verification.

In 2018, the National Automation Clearing House Association (NACHA) completed 23B micro deposit transactions with a value of $51.2T. While the ACH Network proves to be a very cost-effective method for completing these transactions, it has lacked immediacy since always.

While NACHA also launched same-day ACH payments all the way back in 2015, the adoption of same-day payments for micro-deposits remains low. NACHA has commented about an API-based, real-time verification approach, but no significant improvement has been made.

Similarly, a huge range of mobile and online banking suites are available to banks and credit unions are also reliant on micro deposit verification. Regardless of the scale of the service, or how new it is, most businesses still tend to rely on micro deposit bank verification.

Flaws in Micro-Deposit Verification Process

Banks and credit unions should follow the steps of modern-day e-commerce companies. Customer experience in the web 2.0 era is all about fast experience. Customers aren’t willing to wait days for basic processes to be approved. In the eCommerce industry, any delay in payments can lead to account cart abandonment.

In the banking sector, every 10 seconds that are added to the customer onboarding process increases 5% the risk of application abandonment.

So, the best way for banks to move forward is to increase their conversion rates and improve the rate of customer acquisition. This can be done using automation, and other technologies for the onboarding and account verification process.

Bank Account Verification Best Practices

Financial institutions that want to verify bank account information should find some better ways. If micro-deposits are a widely used method, banks should renounce it if it increases the chances of application abandonment. Here are the two best replacements for micro-deposit bank account verification:

1. Instant Account Verification (IAV)

It’s important to include customers in the verification process to boost relationships, but banks should do it with the help of more seamless technologies. Instant account verification doesn’t rely on two small deposits to the customer accounts. And, as the name suggests, the process is instant. 

2. Real-Time Account Transaction Monitoring

The biggest challenge banks face while moving on from micro deposit verification is that they can’t access their own data. 

Banks and credit unions have data that when used correctly can predict fraud before it happens. More than often, all of this data is hidden beneath a bank’s core systems, or is only available on a batch basis. There are technologies out there that can help banks access this transactional data, which helps in verifying bank accounts and predicting fraud. 

Conclusion: Customers Demand Real-Time Verification

Micro deposits helped banks and financial institutions a lot in the past. But customers of today prefer faster resolution times and friction-proof validation. So, for banks to provide an ideal customer experience, there’s a heavy need for micro deposit verification alternatives.

Categories
Bank

Rise of Open Banking – New Innovations for Small and Medium Sized Businesses

Small businesses of today aren’t like the old days, limited to a particular market. Today’s small to medium-sized businesses (SMB) are evolving and leveraging emerging technologies to keep up with the giants. While some businesses are still stuck with old and traditional methods for customer acquisition, capital access, and more. Businesses using digital apps and services have a clear advantage. 

More and more consumers are now using open banking-powered solutions to handle their finances, save time, and save money. So, it makes sense for SMBs to also jump on the open banking bandwagon. This helps SMBs to cater to consumers’ needs and understand their demands. In this increasingly digital world, any SMB that’s capable of providing a unique yet tailored customer experience wins the race.

The crisis brought forth by the pandemic in the last two years has forced SMBs to ride the financial technology wave. A study conducted by Mastercard named the Rise of Open Banking, highlighted the rising costs and newer methods for customer acquisition and other important factors for SMBs. 

The new and easier access to technology has led to an encouraging trend, SMB owners have been quick to adopt digital tools to fund, manage, and promote businesses. According to a finding in Mastercard’s study, 9 out of 10 small business owners consider themselves heavy FinTech users. Their use is both personal and commercial. 

Some other important pointers from the research include:

  • 80% of SMB owners started using digital channels for loan applications in the last 2 years.
  • 84% claim that technologies make them feel better while applying for loans.
  • 64% have received some kind of business loan using digital means. 

The adoption of digital channels is higher than consumer numbers. SMB owners need to generate enough business to stay afloat so they’re more than happy to adopt technologies. They’re accustomed to adopting market conditions.

Digital Transformation is Solving SMB Challenges

The Covid-19 pandemic forced businesses all over the globe on how they operate. Banking, finance, investing, savings, and several other parts of the financial industry have gone digital. Technologies are changing how businesses conduct their day-to-day activities.

Doing businesses from home or while traveling has become super easy. Small business owners are taking advantage of every possible beneficial technology available to them. They’re also one of the most FinTech-heavy businesses, regardless of the industry. 

While business owners are learning how to adapt and adjust to uncertain and changing regulations. Some concerns that every SMB owner has in their mind are:

1. Inflation

The rising costs of almost everything are the first and foremost concern for small business owners. With this year’s record-breaking price hikes, businesses have to find new solutions to cut down costs and remain profitable. 47% of owners claim that rising costs are their biggest concern. Consumer-focused industries such as restaurants, and retail have it even tougher to stay profitable. 

2. New Customer Acquisition

39% of SMB owners say that acquiring new customers is the biggest pain point. Professional services businesses were more urgent about new customers. 49% of SMB owners say that finding new customers is their day-to-day concern. 

3. Hiring Skilled Employees

Pandemic-related challenges quickly changed the employment landscape quickly and drastically. 35% of all employers are having trouble finding skilled employees in this new landscape of hiring. 

4. Managing Operations

27% of owners said that efficient tools and systems to manage operations are one of the biggest challenges for them.

Open Banking Innovations – Improving Speed, Efficiency, and Personalization

Over 80% of SMB owners want faster, easier access to capital. This is why they’re more than ready to partner with FinTech for customized, and agile funding solutions. Almost all SMB owners heavily rely on credit cards, and 81% of owners are interested in business loans that meet their requirements perfectly. Over 60% of small business owners require loans to keep surviving in the market. 

Faster payments are also something that SMB owners look forward to. To streamline the payment processing experience for customers, Small business owners use Open banking tools. They leverage digital wallets, cryptocurrency, and other FinTech tools. 

Connecting accounts to manage businesses’ finances provides the opportunity to give personalized insights. It also adds convenience for SMB owners wanting to streamline the way to handle business operations such as banking, invoicing, managing cash flow, and paying bills.

SMB Open Banking Adoption is Going Strong

SMB owners are using open banking innovations to better handle their finances. By integrating open banking into their operations, they’re creating a smoother, and easier-to-handle workflow.

Open banking can streamline linking accounts, payment processing, customer onboarding, bank account verification, and other parts of a business.

Owners are linking their financial accounts with open banking solutions to gain a competitive edge above their competitors. 85% of SMB owners are looking for solutions that can be customized according to their business needs.

Feeding intelligent, and quality data in financial management tools is giving businesses the edge they need for growing in this changing environment. Paying and getting paid becomes faster and more efficient.

Categories
Bank

How does Bank Data Validation Process Work?

Now that the financial industry has completely embraced technologies into their processes, it’s important for them to make sure that payments are error-proof. Customers make mistakes. Instead of trying to teach customers the right way, banks should employ a bank data validation tool. Banks should try to make every part of a customer’s journey as seamless as possible. This also includes smoothing out the transactions.

Another added benefit of doing so is that it helps in preventing fraudulent activities. When banks verify bank account information before every transaction, it reduces the risk of fraudulent payments going through. It goes without saying, bank data validation is crucial.

But what exactly is “Bank Data Validation?” In this article, we will shed some light on the bank data validation process and how it helps out banks and customers.

What is Bank Data Validation?

A lot of consumers confuse bank data validation and bank data verification processes. While they may sound the same, the processes are slightly different. Bank account data verification means verifying the input information against the information present in the database. Data validation on the other hand involves an algorithm-based process. 

In simple words, it means that payment details are checked using a series of data and information. This allows the system to understand whether an account exists or not based on the numbers.

Moreover, this process is instant during payments, meaning customers don’t have to wait. Merchants can instantly verify the details and correct any errors that pop up. Bank data validation offers a number of benefits:

  • Reduces the risk of payment errors/failures
  • Eliminates the need of inputting bank details over and over again
  • Uncovers and prevents fraudulent transactions

What is Bank Data Validation Automation?

Now that you have a fair understanding of how the bank data validation process works, let’s discuss how banks can implement it. The process of implementation is super easy for merchants. There are endless online solutions that will gladly help you implement the solution. You can ask them to install the solution and then automate the bank validation on the input of payment information.

There are a lot of bank data validation solutions out there, it’s easy to choose one based on your needs. 

The process itself is pretty difficult, and it requires a deep understanding of data structures. Basically, the third-party services simultaneously check if the account information is correct and if the account can make the payments. 

With access to this information, banks can decide whether to authorize the payments or not. Additionally, the bank data validation solution can also be used to access other data such as Bank Identifier Code (BIC), IBAN, and other information.

Advantages of Using a Bank Data Validation Solution

There are a number of benefits of implementing a bank data validation solution. Banks of today need to provide a smooth experience to the customers, so technological integration is important. A bank data validation solution can help your business by:

  • Avoid Payment Delays

When you have a process in place that verifies bank information before payment, you can get rid of unwanted payment delays. Any incorrect information that a customer adds will be instantly identified. Customers won’t have to re-enter information once the payment fails.

  • Eliminate Fraud & Multiple Tries

If a transaction is authorized without verifying the details, it can be expensive to rectify the information. So, the best way to move forward is by identifying information firsthand. It can also reduce the risk of fraudulent payments being authorized.

  • Valid Payments

It helps in confirming if the payments are valid or not before they are processed. This leads to improved customer satisfaction. Customers get annoyed if they have to re-enter the same information. When information is verified firsthand before the payment, customers get a sense of security in the institution.

Simply put, bank data validation is an essential tool for increasingly modern banking. It improves customer satisfaction, and also reduces the headaches for the bank’s payment processing team. 

Categories
Bank

Why Open Banking for Income Verification?

Going through a loan application process is one of the most daunting things you can go through. Whether you’re looking forward to buying a home, or automobile or have to go through a mortgage lending process, you have to sit through this process. The biggest part of the loan approval process is income verification.

It can take a lot of time and involves a huge number of paperwork. If you have all the right documents stored in a particular place, then you can use them to complete the process fast. But, if you have your documents scattered all over, then the process becomes frustrating. 

Here’s how open banking can help in the income verification process for lending.

Common Documents Used for Income Verification Process?

Paystubs are one of the most common documents that are used to verify a person’s income. It serves two purposes, it can help in completing income and employment verification. With a paycheck that’s traceable back to the employer, a lender can easily figure out what kind of income that’s coming in. They can also follow up with the employer to verify the information provided by the lender. 

Other income documents include proof-of-income letters, the standard W-2 annual tax statement can also work. Other tax forms may be more fragmented. Unfortunately, these documents aren’t available all the time. While they can be easily obtained from your organization’s payroll providers and tax filing software, it still requires a significant amount of hassle for both the borrower and the lender. 

Moreover, processing that kind of paperwork, following up with the employers, and verifying the details is time-intensive, and thus money-consuming.

How Open Banking Improves Mortgage Lending?

Mortgages are one of the biggest loans that consumers have to take in their life. This is also why the mortgage application process is complex. According to a survey, the biggest reason why people hesitate to get a home loan is that they’ll have to go through the loan application process. 

Mortgage credit decisions end up falling on the borrower’s ability to make the payments on time. Almost all mortgage lenders ask for at least 2 years worth of income and employment verification history. This happens using tax documents, pay stubs, and asset management. The same goes for self-employed borrowers. 

The recently launched MasterCard open banking platform is able to leverage open banking data to cover all the strict guidelines for high-value loans. This helps in easing the income verification process for both parties.

How Can Renters Benefit from Open Banking?

Homeownership isn’t suitable for every person, and open banking makes the elimination process easier for banks. Landlords screening for potential tenants can also leverage open banking data to make smarter and informed decisions much quicker. It can also be used to give context to low credit scores. There are other red flags that can also be uncovered using open banking. This also leads to a simpler and fairer decision-making process. 

When do Auto Loans Require Income Verification?

Auto loans don’t generally ask for income and employment documents, but they may ask for them whenever a borrower has a low credit score. The same goes for credit cards, personal loans, and other payment sectors.

For low credit score borrowers, just checking the credit score doesn’t tell the whole story. It can lead to frustrating denials, even though they have evidence of qualifying income and they pay bills on time. 

By incorporating income and other data, like transactions from connected bank accounts, debt-to-income ratio, and more. Borrowers can be approved for their car loan and qualify for lower interest rates. Lenders, on the other hand, won’t miss out on onboarding new customers with a simple income and employment verification process.

How Income Data Lead to Personal Lending Decisions?

For many personal lenders, verifying income history may not be the best way to approve loans. With open finance, income data, transaction data, and other financial data can be incorporated into their lending algorithms. 

Personal lenders of all types can look at multiple types of data, based on how much they’re lending and what the money is being used for. The open banking landscape provides highly customized data, straight from the applicant’s bank accounts. This leads to better decision models.

They no longer have to be satisfied with the submitted documents. By accessing consumer permissioned data anytime, lenders can get a complete view of a customer’s financial health and bank account data.

How Does Open Banking Income Verification Helps Consumers?

Verifying a customer’s income with data permission by consumers allows lenders and FinTech developers to streamline the customer experience during the loan application. Moreover, it offers better choices to consumers.

Open banking provides access to data that’s needed to easily verify income quickly, securely, and without manual effort. It is the best solution to improve lending and mortgage processes.

Categories
ID Verification

Basic Mistakes in ID Verification Process

Now that the financial industry is on the wave of digitization, the lives of consumers are changing. With the rise of digital banking, and cloud-based financial services, the number of data breaches also grew. 2016 reached a record of 35 breaches every second. 64% of these data breaches were successful, and they stole users’ personal information like social security numbers, banking information, date of birth, and even medical records. 

The threat of Identity fraud is at an all-time high and it causes major financial losses. The biggest identity theft scam of recent times included Alberto Companioni and Patricia Perez-Gonzalez. Together, they ran a 2-year long credit card and ID theft scheme all across the United States. This scheme resulted in a loss of about $2 million in fraud.

In April 2016, 48 people were accused of setting up fraudulent bank accounts, and withdrawing over $500,000 in stolen cash at Atlantic City Casinos.”

Based on these two situations, and countless others it’s safe to assume that the situation of ID theft is becoming more serious. More and more people are becoming the target of ID theft and how it can harm them if they’re not careful. The numbers revolving around Identity theft are rising, and fraudsters are using newer technologies to trick financial institutions.

Financial institutions have to protect themselves and their customers from these situations. This is why it’s essential to follow through on identity verification methods.

Why are Manual ID Checks Failing?

Advising your customers to follow basic safety practices to protect their identities is useful, but it’s not enough. Let’s say a customer faces an ID theft issue, by the time they face this problem, it’s too late. The fraud has happened already, and the customer has already lost the money. Customers have to sit through the time-consuming processes of reporting. Customers who face a lot of trouble end up switching banks or companies for better security.

To fight this problem of Identity theft with a high success rate, the problem needs to be stopped at its root cause. Banks of all kinds rely on employees to manually verify customer identities, and then they conduct background checks using the ID data. 

The first step of the manual ID verification process isn’t effective in fraud prevention. As there’s a human element involved, it is highly susceptible to human error.

Flaws of Manual ID Verification Processes

Fraudsters of today love the technologies. They leverage endless technologies to their benefit. The manual ID verification process can’t find the flaw in fraudster-generated information. The manual ID verification process is flawed in this digitally fueled environment. Here are the 6 main weaknesses of the manual ID verification process:

1. Prone to Error

Every state has its type of ID proof, and every government tends to make some changes in the ID proof as well. These small changes and the number of ID proofs already make it challenging to find a fake document among 10 real ones. So, manually verifying identities is already a tough challenge. 

On top of that, changing rules and regulations have a lot of states reissuing their ID documents in 2017. It’s almost impossible for bank employees to keep up with all the latest changes. This makes it easier for fraudsters to pass a fake document as the original.

2. Inconvenient

As banks are working around the clock to offer more and more services digitally, the manual ID verification process is becoming inconvenient. New operations and new technologies are taking time to be fully integrated into the processes.

3. Susceptible to Fraud

As branch employees gather personal information directly from the consumers during the ID verification process. It opens them up to situations where branch employees can exploit this data for their gain.

4. Time-Consuming

The current method of manual onboarding makes customers frustrated. We live in an age where customers demand instant results, and they end up dropping the whole process. Having to wait for the information to be entered into the system, and then waiting for the information to be verified gets annoying.

5. Inconsistent

Banks cannot implement a manual ID verification process across all branches at the same level. The overhead cost of documentation and filing the paperwork is exhausting. Plus, it’s hard to keep track of old information, as employees have to shuffle through a deck of information. 

6. Outdated

Most important of all, the manual ID verification process is outdated. Digital driver’s licenses are a new technology that can change the need for manual verification. In manual ID verification, there’s no way to verify if the information is outdated or up-to-date.

Conclusion: Manual ID Verification Process

Financial institutions with an inadequate identity verification process may have to suffer hefty losses. Identity theft and data breaches can happen frequently if a bank isn’t careful about who they onboard. Most importantly, banks with lacking processes can end up paying huge fines for non-compliance with KYC and KYB laws. All in all, the need for technological advancement in the identity verification process is crucial for banks.

Categories
Whitepaper

Guide for Choosing the Best Online 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)
Categories
Payment

How MasterCard is Using Open Banking to Make Fasten ACH Payments?

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.

Categories
AML

Money Laundering Stats and Data

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.

Categories
Bank

Banking-as-a-Service (BaaS) Revolution

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.

But 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 consumer 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 that 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. Read all about it here.