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How can fintech SMEs ensure compliance with industry-wide regulations?

The financial services industry must ensure compliance with a plethora of national and international regulations, particularly those related to KYC and AML, which can be very costly in terms of both time and money. Existing regulations and the pipeline of new directives pose a potential issue for start-ups and SMEs because they often don’t have the resources to maintain compliance, particularly with new mandates. Their core focus is instead on evolving, improving and marketing their product offering which requires an emphasis on ensuring delivery of a standout customer experience to stay ahead of the competition.

New regulations in the financial services industry, however, are coming thick and fast; for example, the fifth version of the EU’s Anti-Money Laundering Directive (5AMLD) is set to become law in January 2020. This is the latest of numerous iterations of the EU’s recent AMLDs. It’s no wonder that nearly two-thirds of financial services firms expect their total compliance budget to be slightly or significantly more over the next 12 months, according to Thomson Reuters.

Furthermore, many of these new regulations contain increasingly stringent sanctions for non-compliance with regulators beginning to crack down hard on those that break the rules. For example, the fine for non-compliance of 5AMLD can reach up to €5 million or ten per cent of annual turnover. Yet the damage to the brand from the negative publicity surrounding the infraction can be significantly more costly than the fine itself.

But it’s not only SMEs that need to concern themselves with regulations. Rather financial services businesses of all sizes need to take a best practice approach to KYC and AML during this period of rising financial crime. In recent research carried out by the AITE Group, executives from US financial institutions and financial crime executives highlighted that 13 billion records were stolen or lost in the US since 2013. This in turn is driving increased application fraud, anticipated to cost US banks $2.7 billion in credit card and DDA losses in 2020, up from $2.2 billion in 2018.

The solution

When sourcing data for ID verification purposes, don’t assume that engaging multiple data suppliers will meet your needs. This tack is not only costly but delivers mismatched and overlapping data. Instead, investigate one-stop shop global identity and contact data verification services that have access to a global dataset of billions of records. Ones that can deliver fast and efficient document checks of passports, driver licenses, and ID cards; and can check at least two or more unique and independent data sources for reliable authentication. Also ones that can readily confirm vital proof of address for accuracy and fraud prevention purposes. Using a service that offers all these elements ensures best practice and adherence to local and global KYC and AML regulations.

Secondly, source ID verification data that can not only verify but correct and enrich the data you have on a customer, thereby adding maximum value to your business.

To ensure seamless new customer onboarding and a standout customer experience, make sure the ID verification process takes place in real-time. Otherwise, there’s a strong chance your prospects could desert to a competitor. Recent research highlights inefficient onboarding is a key driver behind a 56 per cent abandonment rate for banking customers.

Use the latest biometric technology to perform facial matching and liveness checks, ideally with eye movement technology, in real-time, to ensure you are engaging with a real, live person. This can be used for onboarding new customers and to speed up the ID verification process for existing customers – again ensuring a standout customer experience. While biometric technology is relatively inexpensive, make sure you source one, along with an ID verification service, that integrates easily with your existing IT and data systems.

Tools are readily available for fintech SMEs and start-ups to not only achieve compliance quickly and cost effectively with existing and new regulations, but also to help prevent fraud, enabling them to focus most of their energy and precious budget on building and growing a successful business.




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Barley Laing

Barley Laing

UK Managing Director


Member since

28 Jan 2019



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