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Visibility in Payments

In the world of money transfer, I am always trying to explain to startups what it would take have a better understanding on transactions data points for cross-border transfers, i.e. visibility in payments. As part of any compliance program, it is extremely important to grasp how much visibility a company has into its transaction.

Furthermore, I’m also curious to know if this visibility (read: data points) are shared with its transaction partners like banks, processors, etc.

So I devised my own way of classifying how much visibility an entity has into a transaction, and to make it easy, I reference them with “D” i.e. dimensions.

They are six classifications (or dimensions) of payments visibility: 1D, 2D, 3D, 4D, 5D and 6D.

1D / One-Dimension

Just the transaction amount is known. Other than the amount, nothing else is known about the transaction. Was it an aggregate amount? Was it a singular transaction? Was it international or local? Who was the sender? Who was the recipient? Time? Date? Etc. No other information is provided.

2D / Two-Dimensions

Sender/Recipient Information is known, we can see from which account the transaction was originating from and the name of the originating institution and into which account the transaction terminates and the name of the terminating institution. Date, time, amount. Other than this, nothing else is known.

3D / Three-Dimensions

Same as 2D, with added information (data) that we have a high-resolution picture (image) of the sender + plus a scan of the KYC documented of the sender

4D / Four-Dimensions

Same as 3D, with added information (data) that we have a high-resolution picture (image) of the receiver + plus a scan of the KYC documented of the receiver

5D / Five-Dimensions

Same as 4D except we have Biometric scan(s) of the Sender (fingerprint at the very minimum, Iris scan, voice print scan, etc.)

6D / Six-Dimensions

Same as 5D except we have Biometric scan(s) of the Receiver (fingerprint at the very minimum, Iris scan, voice print scan, etc.)

Depending on the privacy laws of the countries, the amount of information that can legally be shared is something to consider. As governments and financial regulators put more pressure on banks and money service businesses, the need for more details on person-to-person transfers is increasing. This is especially true for cross-border P2P transfers.

If you look at transfers to countries like Somalia, Mexico, Nigeria, Bangladesh, etc. Western countries are fearful of money transfer channels being used for money laundering &/or terrorist financing.

Banks used to be content with 1D/2D payments coming from MSBs / MTOs. These were aggregate payments, bunched together, processed and then forwarded. The only problem was the banks did not have granular visibility into the transactions like MSBs / MTOs did.

This is one of the contributing factors that has led towards the de-riskingexercise at banks. Most FIs feel they do not have the necessary controls &/or visibility into the transactions to minimize their risks.

Operators who use high-risk corridors for money transfers are now trying to convince banks on upgrading their system to be able to see beyond 2D. Many MSBs now have the ability to process 4D, 5D and 6D transactions, but the problem lies with the technology infrastructure at banks, which in most cases are not geared to handle transaction data from partners with added details.

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Comments: (3)

Karim Maalouf
Karim Maalouf - Path Solutions - Beirut 02 November, 2015, 08:151 like 1 like

Hello Faisal

I enjoyed reading your article, as nowadays money transfers wil surely be affected by technology and new regulations.

There is no doubt that tech revolution will reach money transfer by changing and increasing security and protection of data.

Nowadays fintech are more focused on improving difgital banking delivery channels, but the revolution is coming to evolve the traditional money transfer by introducing the branchless banking specially in rural countries.

This practice has been proven in Pakistan, Sudan and Philippines, KYC is more maintained in addition to customer satisfaction specially when using their mobile devices for transfer.

I will be happy if i can have your comment.

Regards.

A Finextra member
A Finextra member 03 November, 2015, 07:21Be the first to give this comment the thumbs up 0 likes

Karim: I think there is a disconnect between what is acceptable and what is not. In countries like Pakistan (for example), every bank account holder and mobile SIM holder is biometrically verified, however, fintech startups in the West are hesitant to accept direct account credit (in the bank or the mobile wallet), citing KYC reasons. 

The remittance industry is very "deceptively simple" to cite Peter Osher (of MoneyGram), and I could not agree more. Most companies that I know who are in the remittance space, have never had on-ground experience. They've never visited the beneficiary countries to learn more data and to get a sense of on-ground nuances that they can feedback into their design and development.

Fintech to me is the UI/UX and data layers of the actual experience. Banking (money in bank will remain - that is not being changed), how we interact with a simple facet (read: product or service) that is/was provided by a traditional bank has changed.

In the end, I think it will all be about payments. We will somewhere stop differentiating between bill payments, P2P payments, B2C and B2B.

Regards,


Faisal Khan 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 03 November, 2015, 15:321 like 1 like

@FaisalKhan:

A Silicon Valley based remittance fintech company recently got my attention because it's the only one I know that does B2B cross-border remittances and, that too, using Blockchain. During a concall with me the other day, the founder of this company mused,

  1. "We announced support for USD-GBP corridor but I just found out that we need to open a bank account in UK, so that's gone on the backburner until one of us can find the time to visit London."
  2. "Yeah, I know we told you we use Blockchain for USD-INR corridor but only last week we found out the procedure for tying up with a BTC Exchange in India, so for now we'll be using regular wire transfer". Of course, that doesn't stop this company from joining the chorus of fintech startups in claiming to destroy banks!

My experience totally resonates with your line "Most companies that I know who are in the remittance space, have never had on-ground experience. They've never visited the beneficiary countries".