Category: Bank

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API zur Verifizierung des Bankkontos: Welche Möglichkeiten hat Ihr Unternehmen?

api . zur Verifizierung des Bankkontos

Der Online-Zahlungs- und ACH-Branche fehlt die Autorisierungskomponente, die normalerweise bei Kreditkarten verfügbar ist. Im Gegensatz zu Kreditkarten, bei denen Benutzer autorisieren können, während sie die Zahlung der Kunden über ihre Karten vornehmen, kann die ACH- und Scheckverarbeitung die Bankkontoverifizierungs-API erfordern, um das Zahlungsrisiko zu mindern.

Wenn wir über das Onboarding neuer Kunden sprechen, kann ein fehlendes Verifizierungssystem ein großer Reibungspunkt sein, wenn die Unternehmen wiederkehrende Zahlungen leisten müssen. Die erfolgreiche Überprüfung des Bankkontobesitzes kann sogar die unzähligen Risiken von Finanzbetrug reduzieren. Die meisten Fälle von Geldwäsche passieren, weil Finanzinstitute Strategien und Due-Diligence-Modelle entwickeln müssen, um Fake- und Kontoübernahmebetrug während des Onboardings auszumerzen.

In der Finanzdienstleistungsbranche helfen die Schritte der Kontoverifizierung Unternehmen dabei, zu überprüfen, wem das Konto gehört und ob ein Betrüger das Konto für illegale Zwecke verwendet. Während regulatorische Anforderungen die Banken dazu zwingen, kann das Einhalten von Vorschriften dazu beitragen, das Betrugsrisiko zu verringern und die Kunden-Geschäftsbeziehungen zu verbessern.

Was ist die Bankkontoverifizierung?

Seit der Pandemie ist die Betrugsrate exponentiell gestiegen. Der Grund? Millionen Menschen verlieren ihren Arbeitsplatz und stehen nun vor einer Finanzkrise. Unternehmen, die ständig Online-Transaktionen mit ihren Kunden oder Händlern haben, müssen sich vor Betrügern hüten, die die Identität der Kunden annehmen können. Früher verließen sich Unternehmen, Banken und Finanzinstitute darauf, dass Kunden genaue Bankdaten angeben, und es gab keine Möglichkeit zu überprüfen, ob die bereitgestellten Informationen der Person gehörten, die sie bereitstellte. Manchmal machen Menschen Fehler und geben die falschen Details preis, oder manchmal versuchen sie, Betrug zu begehen, indem sie absichtlich die richtigen Informationen weitergeben.

Aus diesem Grund ist die Überprüfung des Bankkontos von entscheidender Bedeutung. Organisationen, Banken und andere Unternehmen, die in der Finanzbranche tätig sind, müssen die Kontoinhaberschaft überprüfen, bevor sie eine Transaktion abschließen. Die Überprüfung des Bankkontos hilft ihnen zu verstehen, ob die Informationen gültig sind und wem das Konto gehört. Die Überprüfung von Bankkonten hilft sowohl dem Sender als auch dem Empfänger, sicherzustellen, dass das Geld am richtigen Ort gesendet und empfangen wird.

Warum benötigen Unternehmen eine Konto Verifizierung?

Die Beseitigung von Betrug ist der Hauptgrund, warum Banken einen Kontoverifizierungsprozess verlangen. Die meisten Unternehmen, die in der Finanzbranche tätig sind, sind auch an regulatorische Anforderungen gebunden (Unternehmen müssen möglicherweise die Kontoinhaberschaft überprüfen, um die AML-Richtlinie einzuhalten). Die Kontoüberprüfung kann Unternehmen auch davor bewahren, Millionenverluste in Form von Betrugsverlusten und Bußgeldern bei Nichteinhaltung von Regulierungsbehörden zu vermeiden.

Die Überprüfung der Kontoinhaberschaft verhindert das Risiko menschlicher Fehler und reduziert die Zeit- und Ressourcenverschwendung beim Bereinigen der gemachten Fehler. Darüber hinaus hilft es Unternehmen, sich vor bösartigen Akteuren zu schützen, die Betrug wie Geldwäsche, Terrorismusfinanzierung und Rechnungshinterziehung begehen wollen. Die Überprüfung, ob die bereitgestellten Kontoinformationen gültig sind und im Besitz der Person sind, die die Informationen bereitstellt, kann zu reibungsloseren Arbeitsabläufen führen, Zeit und Geld sparen und die Sicherheit vor Betrug gewährleisten.

Verwenden der Kontobestätigungs-API

Die Kontoverifizierung kann auf verschiedene Weise erfolgen, aber nicht alle Methoden sind großartig und so effizient, wie Unternehmen es sich wünschen. Durch die Integration eines API-Schlüssels in die Website können Unternehmen den Verifizierungsprozess verbessern.

Die Online-Bankkonto-Überprüfungs-API von DIRO bietet eine sofortige Dokumentenüberprüfung, die von Unternehmen verwendet werden kann, um die Kontoinhaberschaft zu überprüfen. Mit über 7000 Dokumententypen weltweit können Unternehmen ihren Kampf gegen Online-Betrug verstärken. DIRO bietet eine API, die in die Website integriert werden kann und bei der Überprüfung der Kontoinhaberschaft, des Adressnachweises, der Stromrechnungen und vielem mehr helfen kann.

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Future of Digital Onboarding, Security and Open Banking

Open Banking

Open banking is perfect for changing the environment of the API economy. For the finance and banking industries, as well as payments, insurance, and marketing, open banking offers a whole new scenario in the digital economy. Open banking can offer innovation, disrupt the traditional banking market and greater efficiency inspires optimism, but still, there are some challenges. Educating customers about new opportunities created by open banking will soon become a priority.

Open banking has all the capabilities of the future, but FinTech companies and their partners have to work hard to see open banking become a mainstream service. Customer onboarding, data privacy, and security of services are the three primary elements that’ll allow open banking to continue changing the world.

Current Situation of Open Banking 

Open banking means that banks have to allow FinTech companies access to individual customer accounts and transaction details when the customer requests it. With this, it is easy to reduce friction, increase customer choice, and improve competition. 

Various use cases range from easier small business lending to new payment options like cryptocurrency to better savings accounts. In the UK, the payment service directive, or PSD2 has jump-started the success of the sector. Similar businesses are working around the world, with countries like Japan, Singapore, and Australia focusing heavily on Open Banking initiatives.

Given that the service is relatively new, countries like the U.S. are hesitant to pass the laws that make the service mainstream. The biggest innovation in the space of Open Banking hasn’t happened yet. Open Banking hosts several features but it is new and the lack of education around it makes it suspicious in the eyes of customers and businesses.

The suspicion around open banking is deserved. If you’re giving them access to your bank account to a third party, it is imperative that you trust the entity completely. How is it possible to guarantee security all the while ensuring open banking remains untouched by a regulatory body?

Winning Consumer Trust in Open Banking?

FinTech companies in an open banking environment have to ensure security to potential customers. Open Banking companies will also have to show an original and innovative side while demonstrating that they offer secure data management. For a majority of companies, winning consumer trust will be the biggest challenge. 

But how can FinTech combine innovation with security? In simple words, open banking businesses should follow the lead of traditional banking businesses. Over time, traditional banking has built a huge amount of customer trust by focusing on security and privacy by performing rigorous due diligence.

Customers must be aware of what steps their financial service providers are taking to keep their data and funds safe. Privacy and security aren’t about following Know Your Customer (KYC) and Anti-Money Laundering regulations. Banks and financial services have to be able to provide the best security and privacy to the people they are offering their services.

Centralization of Identity

Verifying customer identities has always been the core of financial services. It is almost impossible to open a bank account without getting their identity verified. Unfortunately, the majority of the world keeps operating with analog tools in an evolving digital environment. Driver’s licenses or passports were mainly intended to be used for in-person verification and not online verification. So proving the identities of people during the account opening process remains a huge challenge. Another big challenge is that more than 1 billion people globally don’t even have an identification document. These people can’t travel, take part in commerce, and receive medical care or government benefits at all without identity documents. 

Things that were industry standard yesterday aren’t the industry standard today. Things are always evolving, and banks and financial institutions constantly need new tools to verify customer identity. In some cases, simple verification is more than enough. Other situations require robust identity authentication checks. Numerous circumstances have different circumstances, but the need for digital ID verification will only grow as time passes. 

Future of Digital ID Verification

New technologies and services can enhance the identity verification process and remove friction from the customer onboarding process. The benefits of technologies and services are extraordinary for both customers and firms. 

The customer has to go through a frictionless process, the business on the other hand enhances the ID verification process and reduces the risk of fraud. While opening a brand new account, each customer has to go through a series of steps that take care of risk and user experience.

The Decade of Open Banking

According to industry experts, the 2020s will be the decade of open banking. Open banking gives birth to new ideas, provides consumers with greater and more control of their financial lives, and it also creates new opportunities for small and medium-sized businesses.

However, there are a variety of challenges to overcome to make open banking a mainstream service. They will have to work a lot to enter the market while educating the public about how they maintain the security of the data.

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Top Use Cases of Blockchain Technology in the Banking Industry

top use cases of blockchain in banking industry

Blockchain or DLT (distributed ledger technology) is an open ledger that keeps track of transactions between two parties permanently. A blockchain is made up of multiple individual blocks all tied up to each other in a specific order. All the involved parties can share the online ledger using a computer network without any middlemen or intermediaries. This leads to faster transaction processing. Improved transaction speed is just one of the many benefits blockchain technology has to offer for the banking industry. 

How Banking Can be Improved with Blockchain Technology?

The overall benefits of blockchain technology make it clear that banking should be the first industry to fully implement blockchain. Blockchain can improve almost every single aspect of the banking industry and make it more secure and transparent. 

Blockchain technology has global implications and it can make trade more seamless and efficient by eliminating the need for documentation relied processes. A public blockchain can be of great use as no single person owns it and every involved party can access the information. Just a decade ago, blockchain technology was associated with digital assets like Bitcoin or Ethereum. That has changed now, utilization of blockchain in banking can enhance a lot of aspects.

Use Cases of Blockchain Technology in Banking

1. Faster Payments

As of now, sending money from one bank to another bank or sending money from one country to another is a huge hassle. By establishing a decentralized channel (cryptocurrencies) for payments, banks can use new technologies to facilitate faster payments. Wire transfers today cost $25-$50 based on the institution and the country you’re sending money to. The use of blockchain can reduce the time taken for payment processing and lower the cost incurred. 

By implementing blockchain, banks will be able to reduce the need for verification from third parties. Back in 2016, 90% of the European payments council believed that blockchain can change the banking industry in the next 10 years. 

2. Clearance and Settlement Systems

Instead of using existing protocols like SWIFT, banks can use blockchain to settle transactions directly and keep track of them more efficiently. 

Even the largest banks globally have to face tons of challenges while moving money around. Something as simple as a bank transfer has to go through several intermediaries and meet compliance regulations before finally reaching the destination.

The centralized payment processing method “SWIFT” processes only payment orders. The money is passed using a series of middlemen. Each of these transactions costs money and takes up a lot of time. Blockchain can allow banks to keep track of all transactions worldwide. Banks can eliminate the need for intermediaries and regulatory bodies to process and settle transactions instantly. 

3. Buying and Selling Assets

By eliminating the middlemen and asset rights transfer, blockchain technology lowers the asset exchange fee. According to studies and reports, using blockchain for moving securities can help in saving more than $20 million annually in global trade process costs.

It is not easy to buy and sell digital assets like stocks as most of the process requires keeping track of which entity owns what. In the earlier days, the purchase and sale of assets were done with a complicated network of middlemen and exchanges. All these transactions revolved around paper documentation. 

Being able to do the same thing electronically is tough and most of the time, buyers and sellers have to rely on a third party to keep track of documentation. Blockchain technology can change the financial industry by keeping decentralized data of digital assets.

4. Blockchain for Accounting and Auditing

Out of all the aspects of online banking, accounting is one section that has been especially slow to move toward digitization. To digitize the accounting process, a series of regulatory requirements involving data integrity and validity have to be met. The implementation of blockchain can bring drastic changes to the accounting and auditing sector as well. 

Industry experts believe that the implication of blockchain technology can simplify compliance and smoothen bookkeeping systems. Instead of maintaining separate records of transaction receipts, firms can add the information in a joint book. All the entries made will be decentralized and accessible to involved parties. 

Thus, the records will be more visible and secure. Blockchain technology will play the role of a digital notary that verifies all the transactions. 

5. Digital Identity Verification

Most banks, firms, and financial institutions still rely on antique, paper-based manual document verification for customer ID verification. A sluggish process that is full of friction forces customers to switch to another organization. With blockchain integration, both companies and customers will enjoy a faster, more secure, and more efficient customer verification process. Blockchain will allow other organizations to reuse customer data for customer verification for other services. 

Future of Blockchain In Banking

Banking industry experts believe that blockchain technology will improve some banking standards, but only if several conditions are met. To use blockchain to its full extent, banks need to build infrastructure that can support and operate a global network. A thorough implementation of blockchain is enough to bring huge changes in the banking industry.

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Customer Onboarding: Providing Seamless KYC and User Experiences

customer onboarding

As a business, you’ve built your marketing campaigns and you have interested buyers ready but your customer onboarding process isn’t up to the mark and it’s hard for your business to acquire new customers. The customer onboarding process needs to be efficient and seamless. Whatever the reason, you won’t be able to grow your business without having a proper customer onboarding process.

According to reports, before the Covid-19 pandemic customer account opening process was the make or breakpoint in the relationship for a customer with a brand. That situation is even worse when firms were forced to shift to online methods.

The online sign-up process may seem simple at first, but the choices that a business makes regarding the customer onboarding process make the shape of the process. Finding and implementing ideal technological solutions are often the difference between success and failure. 

Providing a seamless onboarding process to the customer increases confidence and trust while building a great brand reputation. 

Customer Onboarding and KYC

For various organizations, performing Know Your Customer is a vital step in customer onboarding. While KYC isn’t a legal requirement for every business, it still helps in preventing fraud and verifying customer identities. A business should be aware of whom they are doing business with and what kind of risk they pose to the business. 

Sadly, if not carefully considered and optimized, KYC can lead to an onboarding experience that’s slow and tedious. An imperfect process often results in an increased customer drop-off rate. 73% of all customers have stated that the increase in intolerant poor experiences will force them to switch to another business with a better onboarding process. 

So what can an organization do that balances the need for security and speed while onboarding customers. The first thing to do is to use a risk-based approach, different customers have different needs. So being able to handle new clients the same way isn’t ideal. Understanding the different risk levels customers pose and adapting the onboarding requirements to fit specific scenarios offer better results. 

Document verification technologies can be used to verify customers. Verifying ID documents offers a certain level of secure ID verification for businesses.

You need to consider which technologies make sense when onboarding customers in specific situations. Having various options to verify customers and optimizing the workflows to meet the needs of the customers is the best way to enhance the customer onboarding process. Using deep data analysis, ID verification technologies, online document verification tools, and manual verification intelligence can lead to maximum conversion rates and enhanced ROI. 

Improving Customer Experience during Onboarding

Even the smallest of steps count while eliminating friction from the customer onboarding experience. Some common measures to improve the customer onboarding experience include:

1. Minimizing Data Collection

Most customers aren’t too comfortable with sharing their personal information with businesses. Banks, financial institutions, and other businesses need to carefully consider which information they need from the customers. The more information you ask from the customers, the fewer chances are a customer to stick around. Businesses also have to consider the complex set of data privacy laws, the more data they collect, the more risk they face of going through a data breach. Also, managing huge amounts of data isn’t cheap. 

Ask for the really necessary information. Firms can survive without asking for non-essential data from onboarding customers. 

2. Reducing Onboarding Time

 According to a survey, banks in the USA take up to 2 weeks to successfully onboard a new customer. To reduce the onboarding time and eliminate friction from the process, go through the onboarding process. Ask various members of your team to go through the process to figure out the major problem points. For most banks and financial institutions, this step can reduce the drop-off rate incredibly.

3. Measuring Benchmarks

It’s just not enough to go through the onboarding process once and forget about it. As a business, you should track the performance of the onboarding process. Measuring the success and failure points of your customer onboarding process can help your business get better success. Keep an eye out for metrics such as form abandonment and conversion rates. 

You should also monitor the backend process to reduce false positives and the rate of fraud. Analyze how effective your customer verification process is.

4. Optimizing Experience for Different Markets

Businesses need to understand the market in which they operate. Having an insight into the target market can help in optimizing a customer onboarding process based on customer behavior and industry trends. Different audiences have unique expectations from an onboarding process. Even something as small as asking for additional information can lead to instant customer drop-off. 

5. Providing a Safe and Secure Process

More than 70% of all customers consider security as the most crucial part of any account opening process. With the growing rate of fraud across industries, customers are wary of opening new accounts online. To ensure a customer has the best onboarding experience, brands have to establish a certain degree of trust in the process. 

Organizations need to offer the right trust signals and should have robust technologies set in place to detect and prevent suspicious activities early on. 

How does DIRO Assist in Customer Onboarding Experience Enhancement?

Manually onboarding customers is time-consuming, ineffective, and incredibly tough because of the pandemic. Businesses need to go digital and provide a smooth, frictionless onboarding experience to customers. 

With the integration of technologies in manual workflow, organizations can streamline and strengthen the overall process. DIRO’s online document verification software provides instantaneous document verification. With DIRO online document verification tool, businesses can verify customers from all over the world as it verifies 7000+ document types.

DIRO cross-verifies document data from the original web source, thus eliminating the use of fake and forged documents by 100%. It also provides 100% proof of authentication backed up by verifiable credentials. By using DIRO online document verification software, firms can add an element of security and speed to their customer onboarding process.

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Using Screen Scraping Vs. Bank APIs: How Do You Differentiate Between the Two?

screens scraping vs bank api

Many industry experts believe that open banking is the future and it can provide robust protection against money laundering and other types of financial fraud. Since the Covid-19 pandemic and the use of technologies for banking services, open banking has started catching the attention of other people. One thing’s for sure, open banking will become a more common standard in the industry.

Just a year from now, the number of financial institutes offering open banking will climb from 20 to 200. The reason? Well, most of the biggest banking brands in the financial industry have already started implementing these portals because financial institutions want to quickly capitalize on the newly opened market.

Even the smaller institutions in the industry are trying to jump on the open banking bandwagon. As the technologies will become more proficient, the open banking environment will become a crucial part of the financial industry.

To successfully transition to open banking, FIs will need to thoroughly understand screen scraping (which is a traditional way of data sharing) and banking APIs, which are vital for open banking.

So what’s the difference between screen scraping and APIs? And how do banks evolve from one to another to implement open banking?

Screen Scraping

Screen scraping is a common practice for gathering data in the industry. It is the process of collecting data from one app by inputting user credentials (username and password) and displaying that data somewhere else. Scraping is the cornerstone of data access today, mainly because it allows the companies to choose what kind of data they want to gather and which financial institutions they want to scrape data from.

When it comes to APIs, sanctioned API channels allow financial institutions to limit the fields of information. This can also lead to consumers losing the ability to access the data.

The biggest problem with screen scraping practices for FinTechs is that the process relies on scraped institutions’ website structure, this can be problematic when scraping of data happens without coordination with financial institutions. Screen scraping may not even function when the website downtime results in loss of connectivity. When you compare screen scraping with APIs, the connections are slower.

The only reason for FinTechs to rely on screen scraping technology is because it is the only way for them to collect data. Once they have access to a better, reliable, and faster path, FinTechs will abandon the screen scraping process overnight.

One of the major reasons why screen scraping gets a bad rep in the industry is because financial institutions aren’t aware of who is scraping their data and how much data they’re collecting. Also, financial institutions will have to be responsible for data breaches that happen due to scraped data.

Officers that have the job to maintain security throughout the institution have a really hard time distinguishing between legal and illegal activities. Finally, screen scraping based on credentials login isn’t ideal as the credentials can be stolen and used by someone else.

APIs for Open Banking

There are mainly two types of APIs:

  • Open Standard APIs
  • Proprietary APIs
  1. Open Standard APIs

Even in the Open Standard APIs, there are two different standards, “Open Financial Exchange (OFX)” and “Financial Data Exchange (FDX).” OFX access had some great APIs, more than 7,000 according to their official website. Although OFX has some disadvantages too, they aren’t regularly maintained, it requires a relationship with each financial service company FinTechs connected to, and some of the data can be incorrect. This lack of maintenance can lead to a lot of mistakes. 

FDX on the other hand is the newer and more used standard of Open APIs in recent years. There are even talks about OFX and FDX working together to create something much better for financial institutions. If that becomes a reality, this can be the future of Open Banking. 

  1. Proprietary APIs

The proprietary APIs are obviously owned by FinTechs and they share the same benefits as OFX and FDX, especially when it comes to reliability, speed, and consistency. Proprietary APIs are maintained in a better way because they are focused on and there’s a huge incentive to use these APIs.

Although these APIs aren’t really common, the data that financial institutions access through them is limited and sometimes even almost non-existent.

DIRO’s Online Banking Verification API

APIs are easy and simple to integrate into websites and they can cut costs and reduce the mistakes that financial institutions often make. DIRO bank account verification API can assist the financial institution in complying with KYC and AML regulations, fighting financial fraud, and reducing the costs of manual resources.

The DIRO provides financial institutions with a custom API key that can be integrated into their website and verify customer and client documents in an instant. DIRO cross-references document data from thousands of government and private original web sources to provide proof of authentication with verifiable credentials. Financial institutions can use DIRO bank verification API to make their workflow easier and eliminate the need for screen scraping for due diligence checks.

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How Blockchain Can Affect Traditional Banking?

how does blockchain affect banking industry

Blockchain has taken the world by storm and is changing everything, from payment transactions to how money is raised to security in online banking. The main question here is, can traditional banking embrace the change or will it be replaced by something new? It is undeniable that blockchain affects banking in a number of ways. 

In the last decade itself, blockchain technology has received a lot of attention, and all for the right reasons. Despite the skepticism about the technology, the question “will blockchain revolutionize the banking industry?” remains.

Blockchain and Banking: What Role It Plays in the Financial Industry?

Blockchain technology offers a way for untrusted parties to verify the state of a database without the need for a middleman. A blockchain offers a ledger where the information is available to everyone and the information is immutable. A blockchain could provide specific financial services such as payments without needing a bank operating as a middleman. It can also enhance data security, and bank account verification and customer ID verification process. 

Blockchain technology/decentralized ledger technology has a huge chance of disrupting banking by reducing the need for middlemen. Here’s a proper breakdown of how blockchain affects the banking industry while providing new business models using technology.

How Blockchain Will Change Traditional Banking Methods?

1. Improves Sending & Receiving Payments

Sending and receiving payments using traditional banking methods is not exactly effective. Let’s say you want to send money from the U.S. to the U.K., you’ll have to pay a fee to the middleman for a wire transfer. To make matters worse, the person you’re sending money to, may not even register the transaction until a week later. 

Completing payments is highly profitable for banks, providing them with little to no incentive to lower their fee on transactions. In 2019, banks generated $224B in payment revenue from cross-border transactions, payments to letters of credit, and more. 

Bear no misconceptions in mind, cryptocurrencies have to go a long way to replace government-issued currencies. In the last couple of years, the transaction rate of cryptocurrencies has grown exceptionally, one such example is Bitcoin. 

Some companies are using Blockchain technology to improve their B2B payments in growing economies. A company named BitPesa facilitates blockchain-based payments to growing economic countries like Kenya, Nigeria. 

Blockchain technology is also being used worldwide to support micropayments. Online wallet providers offer users with perks to make micropayments using Bitcoin, U.S dollar, or any other payment method allowed by apps. This is the first way on how blockchain affect banking industry.

2. Clearance and Settlements Systems

As mentioned above, an average bank transfer takes up to 3 days to settle, which is because of the lack of proper infrastructure. The antique financial infrastructure makes moving money around a hassle for both consumers and banks. 

Something as simple as a bank transfer has to go through several intermediaries and comply with a series of compliance requirements for payment completion. Blockchain technology works as a decentralized “ledger” of transactions. Instead of banks utilizing SWIFT to keep track of transactions, interbank blockchain technology can track all the transactions securely. 

Blockchain also supports “atomic” transactions (transactions that are settled as soon as payment is completed). The process is opposite to financial systems globally, which clear and settle the transaction after a couple of days. 

Streamlining blockchain technology can eliminate the high costs of maintaining a global network of banks. According to a report made by Accenture, the use of blockchain can reduce transaction settlement costs by $10B annually. 

3. Enhances Raising Funds Process

If you’ve been in the financial industry all your life then you must be aware of how arduous raising money through venture capital is. Entrepreneurs have to sit through long negotiations just to sell a part of the company for the money required. 

Some companies on the other hand are raising funds using ICO (Initial coin offerings) that are backed by digital assets like Bitcoin and Ethereum. The value of a token is tied to the success of a blockchain company directly. Using ICOs, blockchain companies can raise money by selling coins directly to the public. 

There have been some ICOs that have managed to raise millions upon millions before showing any proof of a viable product. 2018 was the high point for ICOs globally, since then there has been a significant fall in ICO transactions. 

While most of the ICOs had the sole purpose of raising money for blockchain products. Now, we’re seeing a trend change where more and more companies are built around decentralization technology. 

One of the biggest examples is Telegram, a messaging app, raised $1.7B with ICO. The goal behind ICO is to sell tokens to users and set up a payment platform alongside messaging app. Based on regulations, ICO activity should be done with caution. Unregulated ICOs started failing after 2018, thus leading to the fall of ICO transactions. 

4. Ensures Security of Payments and Banking Data

Financial transactions of all kinds come with their fair share of risks. Customers need to know who owns the assets like stocks, and commodities that you’re investing in. The largest financial markets globally achieve this transparency with a complicated chain of brokers, online exchanges, custodian banks, and so on. These relationships are built on a slow paper-based method that can be highly inaccurate. 

If someone wants to buy a share of YouTube, they’ll have to place their order through a stock exchange, the exchange then will match them with a seller. 10 years ago, you’d spend cash and get a certificate for your purchase as proof. 

Now that all these transactions have gone digital, the process has become more complicated. To reduce the hassle of managing the assets every day, companies outsource this process to custodian banks. As buyers and sellers don’t always use the same custodian banks, the banks themselves have to use a third-party service provider to manage the paper certificates. 

To streamline the process, blockchain technology creates a decentralized database of digital assets. With a decentralized ledger, it’s possible to transfer the rights to an asset using cryptographic tokens. Huge cryptocurrency providers like Bitcoin and Ethereum have accomplished this using digital assets. Newer blockchain-based companies are still struggling to find ways to convert real-world assets into crypto tokens. 

5. Secure Loans and Credits Offering

Banks and lenders underwrite loans using an old method known as “Credit Reporting”. The utilization of blockchain technology allows P2P loans, complex programmed loans, and a faster, more secure loan process in general. 

Whenever a person applies for a loan, banks have to assess their risk level. Banks/lenders use credit score, credit history, debt-to-income ratio, and homeownership status. This centralized system can prove hostile to consumers. FTC stated that 1 in every 5 American residents has some kind of error in their credit score that makes it harder for them to acquire loans. As most credit information is distributed between three organizations (Experian, TransUnion, and Equifax), they are usually under attack. The 2017 Equifax data breach led to 150M Americans’ data loss. 

Using blockchain for lending purposes offers a cheaper and efficient solution. This way more people can acquire a personal loan, all the while reducing poor consumer experience and risk of loan fraud. With a cryptographically secure, decentralized ledger of transaction history, banks can decide to approve loans based on a global credit score. 

6. Simplifies the Trade Finance Process

The only reason trade finance exists is to eliminate fraud risk, extend credit, and make sure exporters and importers can take part in international transactions. Trade finance is a vital cog in the global financial process and still, it relies on an outdated method with manual paperwork. 

Blockchain aims to improve and streamline the complex process of trade finance. Which will end up saving billions of dollars for importers, exporters, and their financiers. Trade finance is one of the few areas where blockchain has a firm foot, however, when it comes to streamlining the bills of lending and credit, it’s still taking the initial steps. 

Just like countless other industries, the trade finance market has suffered at the hand of an antique, inefficient manual documentation process. Physical letters from one bank to another bank are still used to ensure that the payment will be received. 

Blockchain technology with its transparency enables firms to securely prove their country of origin, product, and other transaction details. It can provide better visibility into the shipments and a more efficient assurance of delivery. 

7. Customer KYC and Fraud Prevention

Another sector that can be greatly improved with the utilization is customer KYC. Banks/firms/lenders need to verify the identity of their customers using a series of documents before allowing them to use their products or services.

Banks can take up to 3 months to complete their KYC procedures, including photo ID verification, address proof verification, and biometrics verification. A slow KYC process can lead to customers leaving a particular organization and switching to another one. Not just time and effort, banks also have to spend huge amounts for KYC verification. An average of $500 million is spent annually by banks to complete KYC proceedings. 

Blockchain can reduce the human effort and the cost involved in following up with KYC compliance. Customer information can be stored on a blockchain and the decentralized nature of the platform allows all institutions to access the information and complete KYC compliance. Different types of frauds and cyberattacks are a huge concern for banks globally. Once a hacker gains access to a bank’s system they can access all customer information that’s stored on a centralized ledger. By using a decentralized ledger that is Blockchain, banks can ensure security of data. This is one of the major ways on how blockchain affect banking. 

Companies like DIRO utilize blockchain technology and enhance the KYC process. DIRO verifies 7000+ customer document types for KYC verification and offers proof of authentication with verifiable credentials. Verified customer information is then placed on the blockchain with a digital hash. The result is a court-admissible customer document with forensic data. Banks, lenders, and other organizations can use DIRO for streamlining the KYC process by eliminating manual verification of customer documents like bank statements, utility bills, insurance documents, tax return documents, and so on. Plus the documents placed on the blockchain are immutable and secure from fraud.

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Why aren’t KBA Questions The Best Practice in Online Banking?

kba questions

Knowledge-based authentication or commonly known as KBA has been used since the dawn of financial services. KBA questions have been used as a key data point by almost all organizations during customer identification programs. Basically, knowledge-based authentication questions are used to verify a customer by asking them to answer a series of complicated questions. These questions are based on customers’ personal information and historical data. These are the kinds of questions that an attacker can’t answer just by stealing personal information like your driver’s license and more.

Questions are usually generated from public and private data sources, credit reports, and government databases.

Here’s an example of the questions:

  • What was the make and model of your first car?
  • What street did you live on in 2005?
  • Which state was your social security number issued?

While these questions may sound extremely secure, the efficiency of the KBA questions has been failing over time. The reason for that is the greater public availability of information and KBA’s susceptibility to fraudulent actors. This is why strong implementation of KYC compliance is crucial.

Why Is KBA Failing Slowly?

At its most basic level, KBA can be easily compromised mainly because of the amount of personal information that is available online. This availability of information can come from two locations such as social media platforms and high-profile data breaches. 

According to studies, with enough research cybercriminals can easily get around the KBA questions as almost all the private information is available online. One simple search engine search with the person’s name can provide fraudsters with a plethora of information. 

More sophisticated fraudsters use technologies that make it easier for them to access information that is usually buried deep. Plus the data breaches like the Equifax breach in 2017 make things harder for customers. 

Better Banking Solutions to KBA Questions

A better way to mitigate risks of financial crime is to make use of third-party data solutions instead of knowledge-based authentication questions. A criminal can easily guess, research, or spoof KBA questions, it is much more difficult to create synthetic identities to get around third-party data solutions. 

It is much easier to build an idea of someone’s identity by collecting names, DOB, SSN, address, phone number, and email ID. Fraudsters have the means to gather other information such as browser type, IP address, linked bank account information, etc. By collecting and comparing this information available in public and private sectors, hackers can easily fool KBA questions. 

Unless banks have access to real-time identity and document verification during online account opening, it will be almost impossible for banks to verify all the information during online customer onboarding. By reducing reliance on customers to validate identity through data input, institutions are reducing the weak points that fraudsters can use to exploit. Coupling this strategy with extensive, real-time, third-party cross-referencing is the key to improving compliances and reducing online fraud.

What are the Different Types of Authentication Methods During Onboarding

Verifying customer identity is one of the most crucial parts of the customer onboarding process. KYC and AML regulations are changing the way identity verification methods work. Financial Crimes Enforcement Network (FCEN) is one of many regulatory bodies that are responsible for regulating ID verification in the USA. 

  1. Two-Factor Authentication

Two-factor authentication, also known as multi-factor authentication, is a method where the customer has to provide additional information apart from username and password to access their accounts. The additional information is usually a 6 digit numerical code. This code is sent to users once they click on the login button after entering the username and password. Two-factor authentication is a great option for opening accounts and completing impersonation checks whenever a customer tries to access their accounts. 

  1. Credit Bureau-Based Authentication

Another method of customer identity verification is using credit bureau information about a potential customer. This method of verification relies on gathering information about the onboarding customer from any of the major credit bureaus. This information includes data like name, address, and social security number. It also uses a score-based system to create a perfect match without having to put customers’ personal information harm.

  1. Database Methods

Database ID methods collect data from a wide range of sources to verify any identity. These sources of information are made up of online databases such as social media and offline databases such as government data. 

This method of verifying customers is for assessing the level of risk a user poses. Although this method of verification isn’t exactly secure as it doesn’t ensure that the person providing the information isn’t the one making the transactions, thus this method is susceptible to identity theft.

DIRO’s Document Verification Technology For Secure Verification

One of the best ways to verify a customer during the onboarding process and reduce the risk of future financial crime is by verifying all sorts of documents. Using the latest technological features, document verification can be conducted online on all kinds of documents. 

DIRO’s award-winning document verification service is the industry standard for verifying documents and reducing the risk of financial crime for banks, financial institutions, and other industries. It even helps in diminishing the risk of human error. Institutions just have to log in to DIRO’s secure browser and verify if a document is original or not.

DIRO’s innovative technology does instant document verification and offers 100% proof of authentication. The proof of authentication itself can be used as an original document by users. By utilizing all the technology has to offer, banks, financial institutions, and FinTechs can improve their chances of fighting financial fraud.

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How to Avoid Bank Frauds Using Technology?

Want to know how to avoid bank fraud? Well, the first step is to follow the basic old-school step with a blend of technology. Fraud is a worldwide phenomenon that affects all multiple industries and can even have a severe impact on the economy of a country. Banks need to understand how to prevent bank frauds, which they can’t do without employing the right kind of technology. One of the most challenging aspects of the banking sector is to make sure that all online transactions are free from any kind of electronic fraud. Technological advancement and adoption is the only answer to the question of “how to control fraud in banks”.

By utilizing the power of data analytics, banks can detect fraud in their initial step and reduce the negative impacts of significant losses regarding fraud. This is one of the primary methods how to prevent bank fraud.

The present-day studies indicate that false documentation and inadequate training of employees are the reason for 60% of all banking fraud cases. Most of the frauds in banking institutions are detected through customer complaints or some external tip, which is the case with global banking frauds. To mitigate risks, banks need to learn how to prevent online banking fraud. 

Large and small businesses alike are targets of online bank frauds, it is also called ACH fraud or wire fraud. Once cybercriminals can find a weak point in the banking system, they can create a lot of nuisance before being detected finally. 

Banks, financial institutions, and FinTechs need to understand the need for technology so they can reduce the number of frauds they have to suffer through. If you wish to understand how to prevent online banking fraud, then you need to employ technologies such as DIRO’s document verification technology.

Technologies For Online Banking Fraud Prevention

1. Multi-Factor Authentication

The best step is to start with a multi-factor authentication structure to improve the first layer of security. Financial institutions can’t solve all their problems just by using multi-layer authentication, they need to start from somewhere. One of the major mistakes made by financial institutions is to leave everything on a single solution which makes them more open to being compromised.

If financial institutions can set up a solution like combining old-fashioned phone calls for bank authentication with online two-factor authentication, they can reduce the risk of fraud by a lot. In the old days of banking, calendars were put in place for all transactions across multiple accounts. If someone has the same banking and transaction routine, then any sudden changes would be marked as red flags. 

2. Banks Need to Monitor Transactions

In the earlier days of banking, banks used to have daily limits imposed on their users. The banks used to impose the limit on their mainframe processor, along with file limits and batch limits, this limit would help to spot if there was something out of the ordinary. Usually, banks don’t watch out for any activity under $9,000 which makes it easier for criminals to fraud the banks by conducting activities under $9,000. One of the best ways how to prevent bank fraud is to monitor transactions more carefully.

3. Employ Dual & Triple Controls

Dual controls on the corporate side are the minimum they can do to reduce the risk of online fraud. The ideal suggestion is to use triple controls, where one person initiates the transaction, a second person approves the transaction and the third person finishes it.

If organizations don’t have the right kind of resources or people to follow up with the triple controls, then they need to set up ACH transactions. Businesses can confirm using a phone call if the transaction was initiated by a specific person, once that is confirmed, the transaction can be completed. This can be done using a person or by setting up an IVR. Usually, only one person will have the ID and password to call the bank and complete the transaction which adds an extra layer of security.

4. Raise Awareness Towards Fraud

One of the best ways how to control fraud in banks is to keep educating the customers about the ways they can reduce fraud. The rise of online banking has given rise to a lot of online fraud. Banks and other financial institutions can employ all the technology they want but the real solution won’t happen till customers are aware of the threats.

5. DIRO Document Verification Technology

This is one hardcore technological solution to make sure banks, financial institutions, and FinTechs can mitigate the risk of online fraud. Using the technology, organizations can streamline the customer onboarding process and verify documents to reduce online fraud and money laundering. 

DIRO’s document verification technology can verify documents like bank statements, bank account verification, utility bills, address proof, and student records. During the customer onboarding process, banks can verify customer documents to make sure the customers are who they say they are. Money laundering and terrorist funding can be stopped by verifying customers before they can cause any real problems.

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Types of Bank Account Verification Methods & How DIRO Facilitates Account Verification?

types of bank account verification

Verifying a bank account is one of the most crucial parts of minimizing the risks of fraud and scams for a bank, financial organization, or FinTechs. With the technology growing at an incredible pace, ACH transactions are at an all-time high. Bank account verification is crucial during online funds transfers commonly known as ACH transactions as it ensures where the funds are coming from and if they are associated with any malicious activities. 

Many businesses are offering online payments in alternative to payment methods such as credit cards and paper checks. Finding an ideal method of bank verification can be suitable for users as it improves user experience. 

Using the right methods of bank verification will allow you to mitigate the risks of fraud and scams.

Reliable Bank Account Verification Methods

Banks, financial organizations, and other FinTechs need to employ the methods for bank account verification if they intend to keep their brand reputation intact. Here are the best bank account verification methods to keep an eye out for.

1. Use Micro Deposits Verification

Micro-deposits are deposits of less than ten cents transferred from one financial institution to another that can help in verifying if a specific account type is valid or not. If a bank does not offer the feature of online banking or if the users can’t remember their credentials even then they can make micro-deposits for account verification as it is a self-contained process. 

When using micro-deposit verifications, the user will fill in their bank account and routing information. Two small credits are sent to the customer’s account that will be reflected in 1-5 business days. These amounts will confirm that the user can access their own account. 

2. Instant Account Verification Service (IAV)

The fastest method of bank account verification is by using the instant account verification service from the bank itself. Using instant account verification can even improve your overall user experience. With IAV, a user is asked to choose their bank and submit their online banking credentials to verify the account. In just mere seconds, the bank account is verified and the users can start with their banking features.

3. Third-Party Bank Verification Methods

A check verification service or a third-party bank verification service provides businesses, individuals, or other financial institutions with the ability to check the validity of the account. 

Third-party bank account verification can be done using multiple methods such as checking different databases with negative account history, checking to route and account number is valid or not, orax contacting the bank directly to confirm the information.

How does DIRO Improve the Account Verification Process?

DIRO’s technology captures original documents from any web source online. Using DIRO’s technology, users can verify bank account documents (any kind of documents) that can assist banks & FinTechs in verifying bank accounts and reduce the risk of frauds and scams. 

All types of bank account verification can be done in seconds using DIRO bank account verification technology. Even the best bank account verification methods can often fail to verify cleverly fabricated bank documents. DIRO verifies the documents against the original web source to reduce the risk of financial crime.