Is a FinTech startup still a financial institution?The reality is that just because a lot of FinTech companies are startups, it doesn’t make them any less of a financial institution. Finance is a highly regulated field, and if FinTech companies want to play with the big boys, they must comply with the same regulations traditional financial institutions comply with. Because of the misunderstanding a lot of people have about the position of FinTech companies and regulation, this will be the first part of our series dedicated to compliance. Today’s topic: Digital verification – eKYC
KYC and eKYCKnow your customer, “KYC”, is a set of processes where the identity of a customer is verified using independent source documents and reliable data or information. A customer can only conduct business with a financial institution if they have passed this process. The financial institution needs to ensure that they are not aiding or playing a role in the transfer of illicit funds or channeling genuine funds to finance illegal activities. KYC is a crucial process in a financial institution’s compliance program as governed by the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUA). eKYC is the digital reincarnation of the KYC process.
What makes eKYC “e”? 🧐Traditional financial institutions conduct the KYC process in person and with the use of hard documents. What makes eKYC different is that with the help of technology, this is all done digitally. Different companies conduct eKYC differently, but what we do here at MoneyMatch is ask our customers to upload a picture of their ID (front and back) and a video of them following the instructions on our app (for example, “say the numbers 1 to 7”). The video is to ensure that the ID actually belongs to the person creating the account with us. Internally, when eKYC is done, the compliance team verifies the legitimacy of the ID and assess the customers’ risk based on a set of internal parameters. If everything checks out, then the customer will be given access to our platform.
Why is eKYC important for compliance? 🕵🏻♀🕵🏻Despite FinTech’s reputation for disruption, compliance is no less important in FinTech startups than it is in traditional financial institutions. As a reporting entity, regulated FinTech startups must strictly adhere to the rules and regulations as defined in AMLATFPUA by the central bank and must flag any account/person who provides a fake ID during the eKYC process to ensure that the platform remains safe for the financial institution and for its customers.
How is eKYC benefiting the customer 🤔With the adoption of eKYC in Malaysia, customers no longer have to visit physical branches of financial institutions in any step of the process. Now they can do everything through their device, from signup to making a transfer while still maintaining the same level of security without leaving the comfort of their homes.
What is MoneyMatch’s position on eKYC?We have implemented eKYC from our inception and, without tooting our horn too much, we actually were the first to bring eKYC to Malaysia. With the introduction of this new technology, many companies such as Big Pay, Grab Wallet, and Boost are using it to give consumers a better and smoother user experience. So, you’re welcome. 😜
What are your thoughts on the shift to digital verification? Let us know in the comments below! Have you created an account with MoneyMatch yet? Create an account here!