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Machine Learning Technology for Detecting Fraud: How to Leverage Technologies?

In the last couple of years, the number of fraudulent services available in the market has increased. It has become essential for banks and financial institutions to employ machine learning technology that can help in fraud prevention.

While protecting customers by detecting fraud is a huge challenge, it should always be kept high on the agenda. But you do need to keep in mind that finding the balance between fraud prevention and customer experience is crucial for businesses. 

With the emergence of endless data sources, ready to be accessed at any given time. With greater control and accuracy over the data available, it opens banks up to new opportunities to detect fraudulent activities. Such as using machine learning technologies for fraud prevention.

Across the data landscape, we can see how the industry is slowly changing and allowing for better and more accurate results. Be it customer verification, customer validation, onboarding, decision making, or anything else. Machine learning for fraud detection is a great solution.

As many organizations have adopted traditional rule-based strategies, they need a lot of effort to manage. And with the increasing data points for better accuracy, the process becomes too large for humans. With the growth of digital traffic and the increasing need of identifying customers, institutions need better fraud prevention solutions. This includes the best machine learning algorithms for fraud detection.

Why Use Machine Learning for Fraud Detection?

With the ever-growing number of fraud services available in the market, it’s crucial to have a clear view of the fraud risk. With machine learning fraud detection, bank can understand their customer data better. 

As more and more consumers need instant decisioning, and process fulfillment. The need for faster and more accurate fraud checks has to be included in the customer journey. When making online decisions where customer journeys will be affected, it’s even more important that only these activities with a real risk of being fraudulent are being prevented.

At the same time, it’s also important to impact the experience of customers by subjecting them to unnecessary delays while doing customer verification. Additionally. There’s a limit to the effectiveness of the rule-based referral strategy as it requires a lot of effort to manage the number of permutations. 

Adopting machine learning technologies can help organizations build a smooth customer journey. This can be done while flagging potential fraudulent attempts which can impact the bottom line.

Common Machine Learning Misconception

1. Machine Learning is New

Machine learning technologies have been used for over 20 years across multiple industries. The technology has been helping businesses in making smarter decisions, streamlining processes and so much more. 

2. Machine Learning is Self-Learning

Machine learning models for fraud detection can keep evolving based on the recent problems they’ve solved. Within the identity and fraud department, it isn’t suitable to deploy auto-learning models as it makes governance easier. Model performance is continually monitored and seen where it has degraded. Replacement models will only be deployed with visibility of the differences between the current and the older models.

3. Supervised and Unsupervised Models

Supervised models don’t necessarily mean that there’s human involvement in every step. Even the supervised models operate according to the data fed to them.

Who Can Use Machine Learning Software?

While a lot of businesses already leverage machine learning technologies to complete specific processes. Implementing better automation in the fraud detection process is still an unseen phenomenon. However, increasing amounts of data sets can improve the ID verification process.

The use of ML is becoming more crucial for several businesses. Machine learning solutions can understand complicated relations between data sets within a business. 

Although access to machine learning for fraud detection has been limited, especially when it comes to fraud management. Traditionally, machine learning is often available only to bigger organizations, now even small-scale businesses are getting access to machine learning software.

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Benefits of Open Banking for Consumers

Things have changed in how people handle their finances. This is because of the recent wave of modernization in banking. FinTech innovations are changing the way consumers think about their finances. The Covid-19 pandemic has accelerated digital banking transactions. The shifting reality of how finances are managed is growing. Bank branches and paper checks are second options to a lot of consumers. Eight in 10 Americans are linking their bank accounts digitally and using these services to automate their banking processes.

The sudden change in consumer expectations is met with robust technologies. With every leap in speed, security, and ease of use, open banking services have revolutionized banking. When it comes to personal finances, people want real data whenever they want to.

Here are some benefits of open banking services.

Benefits of Using Open Banking Services

1. Saving More Time

Probably the biggest benefit of open banking services is that it helps in saving time. Most people prefer using online banking services instead of cash, or credit and debit cards. With the widespread adoption of P2P payment apps, these antiqued processes are quickly becoming a thing of the past.

In real-time, payments can be split between friends with a few taps on the mobile screen. Digital wallets allow busy shoppers allow someone who wants to shop quickly without having to wait for card payments.

Encrypted credit card info auto-populates, saving time and reducing errors when shopping online.

2. Saving Money

65% of Americans don’t know how much money they’ve spent last month. Most people don’t know how to save money and online shopping has forced consumers to spend more. So much emphasis is placed on new and better ways to spend that saving has become just an afterthought.

AI and machine-learning engines do the heavy lifting of savings calculation, set goals, and projection, raising the level of users’ financial literacy. 42% of Americans surveyed that they wanted help saving their money, and trust technology to offer them the financial advantage they need.

Open banking technology powers some of the most effective FinTech apps for saving money.

3. Improvement of Financial Health

Open banking and AI are changing the world. Anyone can download a financial management app, provide permission to access their banking information, and be guided easily through opening accounts, investment suggestions, and loan applications. 

FinTech AI systems offer massive amounts of data in milliseconds. App and service developers can leverage this power to analyze a consumer’s subscription payments. Machine learning and AI can use this real-time data to offer smart financial planning and brilliant investment options. 

As a result, financial decision-making can improve their services dramatically. Consumers are seeing the positive results of adoption in their bank balances.

4. Automation

Another great reason for using online banking services is that it allows for a greater level of anticipation. Repetitive, time-consuming financial tasks can be automated to reduce the time-consuming process. Open banking offers easy setup and maintenance of connections to financial institutions and offers consumers to set a variety of monthly payments.

5. Better View of Finances

Consumers of today don’t want to maintain financial records on a series of lost papers, stuffed in a drawer. Open banking data has spawned a wealth of apps and services that provide consumers and small businesses a real-time overview of their finances. 

Open banking can sync across multiple accounts and across financial institutions to provide consumers with a complete overview of their finances. The expectation is that individuals should be able to see where their money is going, anytime they want.

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New Account Verification Rules – What They Hold for Consumers and Financial Institutions

The payments industry is changing faster than ever. Consumers are welcoming a number of changes and adopting the latest technologies. Customers globally are moving towards an online payments landscape instead of relying on cash and checks. There are over 140 online payment methods available globally. The use of online payments is also giving a boost to the already growing eCommerce industry. 

While cash is still the primary method of transaction, soon there will be a drop in global cash usage. This can be credited to instant bank transfers and mobile wallet payments. Some of the market-leading mobile wallet apps are:

  • Google Pay
  • Apple Pay
  • Samsung Pay

Several other contactless payment methods are slowly changing the payments industry. So, it makes sense that the customer bank account verification methods need to change too.

Fraudsters Look for Weak Points

With the rise of digital payments, digital fraud is rising too. The Automated Clearing House is one of the most common targets for fraudsters all over the world. Fraud in the ACH channel is happening throughout global payments. Plus, there is a 40% increase in customers experiencing fraud events at some point in their lives.

ACH transactions are used widely throughout the USA because they are simple to use and affordable. Transaction fees on the ACH channels are lower than card fees and wire transfers. This is why the ACH channel is used all over the USA. This reliance is also attracting fraudsters of all kinds. 

The ACH payment process isn’t compromised. The fraudsters attack the processes that happen before the transaction. Most fraudsters try to get the payments into their accounts instead of the actual account.

These frauds happen with the help of fishing fraud, social engineering attacks, data breaches, and others. These attacks help fraudsters gain the information they need to steal customer identity data. Then, fraudsters can use this information for creating synthetic identities or to do account takeovers.

To protect customers, vendors, and institutions, better methods of account verification need to be employed.

New Account Verification Rules

NACHA, the ACH operating entity, is trying to bring about some changes in the industry. They’ve adopted a new rule that requires financial institutions to go beyond the old standard for providing security to online transactions. To combat account fraud, account validation is becoming a part of the process.

NACHA also stated that they understand the implementation of these rules will have impacts on booth payment originating institutions, and payment receiving institutions. This includes the increased cost as new tools will be needed to be implemented. If banks and financial institutions don’t have the right setup for account verification, they will need to rely on third-party verification software.

These compliance changes offer an opportunity to protect the payments and reduce the risk of fraud. It can also help in reducing non-sufficient fund payments, and user errors. If these new rules are implemented perfectly it can improve the user experience and also improve the brand reputation.

The best bank account verification software offers these results simply and seamlessly. Plus, it can stand tall in the customer’s expectations when doing online transactions. If the process is slow or frustrating, consumers often tend to switch over to some other service provider.

Financial institutions should always focus on improving customer experience while reducing the risk of fraud. It’s a tough path to walk on, but that’s what is expected. If a financial institution can provide a good onboarding experience, it can build a customer reputation.

Making sure that the customer keeps using the account after its opening requires account validation tools that verify data almost instantly. This allows customers to send and receive money with ease.

Bank Account Verification Solution by DIRO

Banks and financial institutions that don’t have any solutions of their own need to rely on third-party services. DIRO online bank account verification solution is the answer. It enables financial institutions to smoothen the customer onboarding process with instant bank account verification.

As the data is cross-verified directly from the issuing source, it also eliminates the use of fake and stolen customer data. Moreover, instant bank verification doesn’t hamper the customer experience, leading to better business-customer relationships.

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Open Banking Initiatives Around the World

Open banking has become the “IT” word of the financial industry. But, it is not just for creating hype, open banking has some incredible real-world applications. 

In case you’re not familiar with open banking, it’s the process of banks and other institutions allowing customers to share their financial data with trusted entities. Open banking/open finance makes bank-to-bank payments easier and allows customers to access all their data in a single place. Everyone here at DIRO and other financial institutions considers open banking to be the future of the financial industry. 

If you don’t have the right knowledge, it may be hard to understand the benefits open banking brings to the table. There are multiple levels of open banking that offer different features.

In this guide, we’ll go over different open banking models, and how countries all over the world are utilizing them to their benefit.

Brief History of Open Banking Around the Globe

The term “Open Banking” first came onto the scene in July 2013, with the launch of the EU’s PSD2 proposal. In which it was recommended that banks allow trusted third-party sources to access customer financial data. These early suggestions went on to become the Open Banking landscape of today. 

Jump to 2022, and Open banking has become a global phenomenon. At least 87% of countries have some type of open banking API. In the European Union, there are over 400 third-party service providers. They are authorized to access financial data using open banking.

State of Open Banking Framework Around the World

Each country has its own way of leveraging an open banking framework. Here’s a peek into the current open banking landscape across the world:

1. State of Open Banking in the UK

Open Banking regulations in the UK require the top 8 banks to create APIs that third-party service providers can use. These APIs have to establish a secure way of data sharing.

The deadline to create these APIs was all the way back in January 2018. While the regulation only asked the 9 banks to create these APIs, other institutions automatically followed suit.

In the UK, third-party service providers can use the Open banking API in two ways.

The TPPs can be Account Information Service Providers, which allows them to get access to payer information and data including balance information and verification. 

Or, the TPPs can be Payment Initiation Service Providers, which allows them to make instant bank-to-bank payments, without needing a card, manual transfer, or direct debit transaction.

The UK is definitely leading the charts when it comes to open banking frameworks, innovation, and customer inclusion. Based on a Report in December 2020, there are over 294 regulated providers of Open Banking in the UK.

Unfortunately, even with this strong open banking product usage in the UK, only 102 out of 294 entities have a live customer offering. Although, the reports suggest an upward trajectory in upcoming years.

While there’s a positive outlook on open banking, a lot of customers are still suspicious and reluctant to use their service. Less than 25% of all UK consumers are happy sharing their financial data with third-party providers.

2. State of Open Banking in the EU

There will be some key differences in all the individual countries across the EU, but the group as an entity is going strong. They’re working strongly towards building a complete open banking structure.

Even though the European Commission made recommendations all the way back in 2013, the deadline for PSD2 readiness was in 2018. Relevant APIs from Europe is about 1 year behind the UK. With this slow API implementation, Europe can be seen as lagging behind on the global stage.

European open banking APIs are lagging behind the UK ones, but we can expect to see a sudden growth in the TPPs using the APIs. 58% of all European FinTech decision makers consider open banking as a great opportunity.

3. State of Open Banking in the US

Unlike the UK and Europe, the USA has taken an industry-based approach to open banking. Industries themselves are building APIs and infrastructure without any oversight from regulatory bodies. 

The current US Open Banking framework has been limited to account information solutions, most of which are done using screen scraping. But Screen Scraping isn’t an effective solution as it has led to some major data leaks. 

The US is definitely behind the UK and Europe in the race for open banking, and the demand for new technologies is growing at an incredible rate. Especially after the Covid-19 pandemic. As the rest of the world is starting to put efforts to build a proper open banking framework, global companies headquartered in the US will start to take advantage of international efforts.

Other Innovators in Open Banking Landscape

There are some other countries that are making great strides when it comes to open banking. Here’s a peek into their efforts:

1. New Zealand

New Zealand’s approach to open banking has been pretty hands-off. There have been some discussions of Consumer Data Rights, but there’s nothing solid. 

2. Canada

Similar to the US, Canada has also taken an industry-led approach. However, there are some government bodies looking at how to create more regulatory oversight moving forward. According to a 2019 report, the implementation of a structured framework would address consumer privacy concerns. 

3. India

The open banking framework has been well established in India since 2016. This implementation was spearheaded by the Unified Payments Interface (UPI). UPI allows consumers to access their bank accounts, and make instant payments to other banks. India is moving forward with a hybrid approach to open banking.

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KYC Requirements in Singapore in 2022

Singapore is one of the world’s leading financial hubs and also one of the Asia-Pacific leaders. So, it makes sense that businesses all over the globe want to invest in the Singapore markets. Economic stability makes it an even better option for investors globally. Singapore for years has been following a pro-business attitude that encourages global trade.

Anyone wishing to do business or onboard Singapore customers must follow the clear and robust KYC and AML guidelines. These KYC guidelines Singapore are set by regulatory bodies in Singapore to prevent ID theft fraud and the rise of money laundering.

KYC Regulations Singapore as Set by MAS

The KYC guidelines Singapore are built and implemented by the “Monetary Authority of Singapore (MAS).” And the Singapore KYC requirements specify that digital verification is acceptable, but businesses have to take appropriate measures, these include:

No verification is needed until a customer moves forward with the account opening process. This is only applicable if there are internal policies that limit access to financial services before customer verification is complete.

Singapore Digital Identity System

Singapore has one of the best digital identity systems. The Singapore digital identity system completely relies on mobile apps and biometric data to make the onboarding process faster.

Citizens of Singapore can use the Singpass app to sign up for a government and private sector services. Singpass is connected to Myinfo (a service that provides verified personal and corporate data) which leads to the remote signing of the documents. 

There’s also a step beyond customer identification, that is the general KYC rules such as due diligence and customer monitoring.

If a customer is on the PEP list or poses a greater risk for money laundering, then an enhanced due diligence level is required. Even greater levels of due diligence are needed if:

  • Transaction activities change
  • The institution changes document standards
  • Lack of appropriate identification information
  • There’s a physical change in relations with the customer

Beneficial Ownership Verification in Singapore

The steps to verifying businesses and beneficial owners lie outside the basic KYC and CDD norms in Singapore. Any director, partner, or entity that has executive-level control over the organization’s operations is considered a beneficial owner. Identities of these beneficial owners have to be identified by businesses.

The Digital identity system in Singapore can also help in hastening this process. Myinfo Business app can automatically provide verified business information and beneficial ownership information data. The app can do this by fetching data from government sources.

An additional level of due diligence is required only if there are any changes in the ownership.

Payment Services Act in Singapore

The Payment Services Act in Singapore undertakes the Licensing and regulation for all the payment service providers. Organizations that have to follow these rules include:

  • Domestic money transfer services
  • International money transfer services
  • Account creation services
  • Merchant acquisition services
  • E-money issuance services
  • Digital payment token services

The biggest impact of these regulations is on entities operating the crypto and the NFT industry. Any entity that works in buying and selling digital assets, offers token exchange, or promotes these services may fall under the payment services act in Singapore.

Payment providers have to be ready to fight money laundering in advance. They should build money laundering prevention systems to combat fraud. Also, all the customers need to go through identity verification.

Low-risk customers need to go through simple due diligence, but customers with high risk have to go through enhanced due diligence. Other methods of risk prevention include Watchlist screening, transaction monitoring, and recording and reporting of transactions that seem suspicious. 

There’s one more regulation that payment companies operating in Singapore have to follow. The regulation is known as Financial Services and Markets Bill also called FSM Bill.  

The goal of the FSM bill is to minimize the risks by licensing the payment service providers and imposing AML/CFT requirements.

State of FinTech Industry in Singapore

Even though the population of Singapore is just 5.9 million, it has 132 banks. Plus, there’s a boom in the FinTech industry in Singapore. In 2021, the investments in the FinTech market rose by 37%. Moreover, the total amount invested in 2021 left China and India behind. 

Singapore is a great platform for companies that want to gain a firm footing. Plus, it can be the perfect place to expand service globally. Singapore is working towards Crypto adoption, which will only boost the financial situation of the country. Currently, the financial environment is highly secure because of the KYC requirements in Singapore.

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DIRO for a Faster Customer Onboarding Process

How you handle customer onboarding sets the tone for your partnership with the customer. Potential customers will drop the process if you have a clunky and slow onboarding process. This is why it is important for businesses to carefully build a robust customer onboarding process. It does more than offer a good customer experience, it helps in boosting revenue, security, and more.

Customers are a crucial part of any business, so it makes sense that their onboarding process should be as smooth as possible. If your customer doesn’t like the way you’re handling the onboarding process, they’ll soon lose interest in your product/service.

DIRO is an emerging business that aims to improve every single part of the customer onboarding process. With a range of use cases and services, DIRO can add speed, security, and efficiency to the customer onboarding process.

Why is the Customer Onboarding Process Important?

Before you understand how DIRO can streamline your customer onboarding process, you need to understand why the process is crucial.

Any business needs a steady number of customers coming in each month to survive. If they have a poor customer onboarding process, they’ll lose more than half of their potential customers.

Consumers of today want seamless experiences and fast results. If a customer has to wait for minutes just for a contact form to open up, they’ll abandon the process altogether.

So, to generate revenue, and boost the brand reputation, businesses need to build every part of the onboarding process carefully.

Build a Customer Onboarding Plan

It becomes easy to build an onboarding process when you know what the end goal is. While keeping this goal in mind, start developing a process in your mind. All your efforts should be dedicated to fulfilling that goal. 

In most cases, the goal is to onboard a new customer and get them to use your service. Businesses can build an effective customer onboarding process by breaking the process into smaller processes:

1. Choose a Demographic

This is a step that a lot of businesses skip, or overlook. Understanding this part is crucial for developing a customer onboarding plan. The truth is that not everyone wants your service, so there’s no point in casting a wide net.

You want customers who need your service. So, choose a demographic or a series of demographics where you want to promote your services. A demographic also means targeting the right age group.

2. Understand the Market

If you don’t have an understanding of your market, your business will never succeed. Understand the ups and downs of the market and then build customer onboarding strategies. Not every market is suitable for your product, and you should know it.

3. Give Value Proposition

Once your product/service is out in the market. You need to start sharing the value that the product is offering. You’ve already completed the toughest task if you can tell your customers why they should jump onto your product/service.

4. Communicate Well

After you’ve finally onboarded a customer, you need to keep in touch with them. Staying in touch with customers serves two purposes, the first one is providing feedback regarding the product, and the second one is providing ideal customer service.

5. Stay Relevant

The world of technologies is ever-changing, there are always some changes. So, as a business, you should always try to keep up with new technologies. Especially the ones that can enhance the customer experience. Staying relevant is a great way to onboard new customers and retain old ones.

How DIRO Makes Customer Onboarding Easier?

Although customer onboarding remains an ever-prevalent challenge for most businesses, it can be streamlined a little with the right technologies.

Currently, the biggest challenge companies face while onboarding customers is verifying documents. There are not too many ways to verify if documents presented by customers are legit or not. This becomes a major concern for businesses under the financial industry umbrella. 

So, DIRO helps businesses of all kinds in verifying online customer documents with global coverage. Verify bank accounts, proof of address documents, utility bills, KYC, and KYB documents, and others to streamline the onboarding process.

DIRO can verify over 9,000 document types instantly by verifying documents directly from the issuing source. DIRO can boost the overall customer experience by reducing the time taken in document verification during onboarding.

You can contact us today if you’re interested in learning how DIRO can help you make the customer onboarding process faster. Moreover, DIRO online document verification can reduce the risk of onboarding fraudsters. As DIRO eliminates the use of fake and stolen customer documents by 100%.

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4 Best Ways to Protect Your Vendors’ from Being Attacked by a Cybercriminal

In the public landscape, vendor bank account fraud is growing at an alarming rate. A vendor contacts the accounts team to tell them they haven’t received the payment. The accounts team then checks the data and finds out that they’ve paid the invoices. So, when more due diligence is done, it is found out that the money wasn’t sent to the Vendor’s account but to some other account altogether. What happened was that a fraudster got into the systems and changed the Vendor’s bank account information.

This situation has happened a lot in recent times. Most recently it happened with Scott County Schools where they lost $3.7M. Eventually, they were able to recover the funds. And they decided to put some safeguards to prevent something like this from happening again.

Another similar situation happened in the “City of El Paso, TX” where they uncovered $2.9M, and $300K payments were sent to a fraudster. Unfortunately, they were only able to recover $1.6M and $292K from the payments. To prevent this from happening again, they decided to verify vendor information before every single payment.

Regardless of the fact your company has been in a similar situation or not, there are 4 basic steps you can follow to prevent fraudsters from changing banking information.

Prevent Vendor Bank Account Fraud

1. Build Custom Vendor Banking Forms

The first and foremost thing you should do is to build a banking form for all the vendors. The reason for doing so are:

  • Don’t accept banking information in an email body. An email with banking details doesn’t provide authentication so that’s why you build the form.
  • Change the form every year. This way your team can distinguish between fake and real forms. If they receive an old form, they can ask the vendor if there’s a mistake.
  • Add vendor authentication on the form. Existing vendors will have to add some kind of information that’s unique to them. No one except the vendor should have that information as it helps in reducing the risk of fraud
  • Your form should require a digital signature. Be careful while building a PDF form with a digital signature built into the form. To avoid emails and calls from vendors saying they’re facing errors, let the vendors use their own digital signature tool.

2. Verify Bank Information

This is a vital step in preventing vendor bank account fraud. As you confirm a vendor’s Legal Name and Tax ID to match IRS records, you should also confirm the bank account information to match them against your records. Moreover, you can use DIRO’s bank account verification service to make sure the documents provided by your vendor are true.

3. Contact Vendor to Confirm Information Change

Once you’ve received the updated form, and confirmed all the data against your records, it’s time to contact the vendor. Call the vendor to verify the changes if there are any. This may seem cumbersome to both parties at first, but the benefits outweigh the pain. There won’t be any payment delays, and you won’t have to try to recover lost money.

While verifying the information, keep in mind that the vendors may not respond right away, so you need to find a way to keep track. If the Vendors don’t respond in time, don’t process the payment.

4. Send Notification to Vendor After Information Change

If there are any changes in the vendor banking information, you should build a system that sends an automatic notification system. Whenever the information is changed, the vendor will receive a notification.

How to Make This Process Efficient?

Building and setting up this process takes up a lot of time. But the process is crucial as it helps vendors and yourself be safe from fraudsters. Implement a vendor self-registration portal for vendors to authenticate themselves and prevent fraud. On the portal, vendors can authenticate themselves and also update their banking information as per their preference.

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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.

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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.

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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.