Is a FinTech startup still a financial institution?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. If FinTech companies want to play with the big boys, they must comply with the same regulations that traditional financial institutions comply with. Due to common misunderstanding 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 a customer’s identity is verified using independent source documents and reliable data. Financial institutions need to ensure that they are not playing a role in the transfer of illicit funds or channeling genuine funds to finance illegal activities. Hence, a customer can only conduct business with a financial institution if they have passed this process. KYC is crucial 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 does it mean by “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. At MoneyMatch, we ask our customers to upload a picture of their ID (front and back). In addition, we require them to upload 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 does belong to the person creating the account with us. Internally, when eKYC is done, the compliance team verifies the legitimacy of the ID. Then, they will assess the customers’ risk based on a set of internal parameters. Once and if everything checks out, the customer will then 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. They must flag any account who provides a fake ID during the eKYC process, ensuring the platform remains safe for the financial institution and its customers.
How does it benefit the customer 🤔With the adoption of eKYC in Malaysia, customers no longer have to visit physical branches of financial institutions. Now they can do everything through their device! Everything from signing-up, to making a transfer while still maintaining the same level of security without leaving 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!