Technology has revolutionised everything. Industries around the world have been disrupted, and those who fail to adapt are left behind. Fintech or financial technology refers to the technology and innovation aimed at revamping the traditional methods being used in the financial industry. Just the way financial institutions and banks work, fintech operates with customers digitally.
It’s no secret the fintech sector has satocketed over the last decade, the share of investment dollars going into fintech has increased from 5% to nearly 20%. Investments in fintech reached $55.3 billion in 2019, with PayPal – a mobile cash app – recording a 17% year-on-year growth and 286 million accounts active worldwide during the same year. The industry is further expected to grow at a compound annual growth rate of 6%, making it worth $26.5 trillion by 2022.
Customers Prefer Digitized Services, So Do Criminals
With the arrival of fintech technology, the consumer pattern has seen a great shift as well, as the users now prefer a digitized experience to access their finances on the go. The increasing customer base in this sector, though reflects a positive effect of this technology, is attracting fraudsters and criminals towards itself as well. One of the key targets of these criminals is to steal the identity information of the users, to either carry out fraud activities or other criminal activities.
The 2020 Identity Fraud Report by Javelin Strategy & Research revealed that identity fraud in financial institutions grew 15% in 2019 to $16.9 billion.
Such fraud activities can result in massive monetary losses, not only for the customers but for the fintech institutions as well. Not to mention the spread of the belief that technologically powered financial services are not secure for users.
Frauds This Industry Needs to Be Aware Of:
As technology evolves, the customers demand quick and easy services from the online platforms which create loopholes in the operations for criminals to exploit. For instance, in providing quick onboarding services to clients. As per a survey, 79% of users will leave if your onboarding experience doesn’t live up to their expectations. To fulfill their demands online companies can onboard suspicious entities without proper verification. This oversight can lead to frauds.
Following are some of the frauds such companies can face:
- Synthetic identity frauds
- Account frauds
- Payment frauds
- Document frauds (such as forged and counterfeit documents, Stolen documents etc.)
How to Curb Identity Thefts?
An individual’s identity and personal information are two essential elements while interacting with the online world. They are integral for procuring goods and services, as they are for fraudulent activities. Therefore, protecting identity information is the basic need for fintech organisations out there. For that, online platforms, especially financial services providers, must perform identity verification checks before onboarding any individual or letting them perform any transactions.
Apart from just frauds, due to the increase in the circulation of digital money, fintech platforms are a potential target for money laundering and terrorist financing as well. Taking into account the essential need for identity verification, various regulatory authorities around the world including the Financial Conduct Authority (FCA), Financial Crimes Enforcement Network (FinCEN), Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) among others have imposed Know your customer (KYC) and Anti-money laundering (AML) regulations on this sector. Authorities have created these laws in a manner that they can be regulated and promoted to grow at the same time.
To further elaborate, identity verification checks safeguard fintech firms against:
- Facilitating money laundering
- Trade of illegal goods
- Terrorist funding
- Political corruption
- Market manipulation
- Penalties from regulators
Video KYC: A Secure Way to Onboard Legit Clients?
The fintech industry with its immense potential provides its customers with technologically advanced financial services, and it requires a solution for identity verification that can keep up with its innovative and evolving services. Moreover, the traditional methods for remote onboarding of customers can prove to be time taking and can result in unwanted errors.
Customer onboarding through Video KYC is becoming increasingly popular in the digital space, due to its quick and convenient verification process. It is helping fintech companies reduce online frauds and ensures the onboarding of legitimate clients.
Video KYC is an identity verification process that identifies and verifies a digital identity through a live video call and document verification.
In the video KYC interview, live KYC is performed and the customer or end-user is guided in real-time to show the identity document to the camera for document verification. The KYC expert asks a few questions from the end-user just like in-person KYC screening while observing their behaviour.
Hence, Video KYC is verily one of the most effective verification solutions for fintech organizations for quick verification of their customers, as it presents them with an opportunity to fulfill both the regulatory and customer requirements at the same time.