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MAJOR UK BANKS CLOSED TO FINTECH BUSINESS.

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MAJOR UK BANKS CLOSED TO FINTECH BUSINESS.

By Andrea Dunlop, CEO of Acquiring and Card Solutions at Paysafe and Deputy Chair of the EPA Advisory Board

Andrea Dunlop

Andrea Dunlop

With London leading the way as the global FinTech hub, some may think that gaining bank services is easy to achieve or a matter of fact if you are an FCA regulated entity.

Over the last few years the Emerging Payments Association has been highlighting the challenges faced by emerging FinTechs in gaining bank accounts in the UK for business. Many companies reach out to the EPA for help and support –particularly FCA regulated companies who are trying to seek accounts or have had access terminated by their bank with no alternative solution.

A consultant working for an FCA regulated entity recently approached the four big UK banks to discuss their position for said entity to open and operate client deposit accounts. All the banks took at least three weeks to respond to the initial request for a meeting. When the consultant finally met with each bank, it was apparent that in each case none had prepared for the meeting and so further meetings were required with more experienced account opening teams. The consultant expressed a frustration that they had been passed around a number of teams that seemed completely uneducated in this sector.

Two of the main UK banks stated that they currently do not support account opening in financial services. The third bank seemed to be going through the motions and ultimately stated they would not be able to provide access to account services, but would not provide reasons for this. Dialogue with the fourth bank proved to be similar; although four people were at least present for the account opening meeting. During this meeting, they stated that they couldn’t support this customer in this sector, but did not offer reasons as to why that was the case.The only option available for the entity was to pursue European-based lower grade banks in order to open a bank account.

UK Challenger Banks are increasingly coming to the fore within the market, but the question remains‘How many are truly on their own rails?’.Many are sponsored by the existing big four UK banks and are therefore not necessarily able to adopt their own risk-based approach. While I do believe that challenger banks will, in the long term, be able to support payment providers, I suspect that we are still some way off. As things currently stand,this does not help a significant number of the FinTech and non-bank regulated companies facing issues right now.

The revised Payment Services Directive (PSD2), which comes into effect from January 2018, will require banks to justify to the regulator why they have declined services to the payments provider. This will hopefully provide greater transparency, however there are many in the industry that believe that this new directive may well have inadvertently increased the rate of de-risking from the UK banks – in which the banks are exiting existing payments providers from their portfolios. This very issue had recently been highlighted in an article by John Basquill of PaymentsCompliance.

Earlier this year a complaint had been submitted to the PSR by a provider whose access arrangement has been terminated by its bank:

https://www.psr.org.uk/psr-receives-first-application-under-section-57-fsbra

There are many in this challenging position with a banking partner. For most, taking action to formally issue a complaint to the PSR would be the last resort. Many providers would not risk making a complaint for fear of damaging their ability to gain service with another provider. It is clear that being terminated by a bank does impact their ability to gain replacement banking services.

By no means do we at the EPA believe this situation is easily solved by the UK banks simply giving account access to an FCA authorised entity as the banks are under their own pressures. According to the Bank for International Settlements (BIS), banks are cutting back or are under pressure from their correspondent bank due to the rising costs of global regulatory compliance – specifically in light of the Know Your Customer’s Customer (KYCC) rules and the uncertainty about how far customer due diligence should go. It is clear that wider guidance and clarity is needed for all parties.

In December 2016, the Emerging Payments Association released a report, titled ‘Who Carries the Can? Indirect Access to Payment Systems: The Implications of Liability’. The conclusion of this report indicated that the impacts of regulation have caused the costs and complexities involved with engaging and monitoring the activities of new and smaller regulated entities to become less commercial with risk still attached.

Improving access has also been a key focus of the Payment System Regulator (PSR) which has recently issued a questionnaire to seek the collective views of the industry. By utilising the results from this targeted questionnaire, the PSR will publish its guidance on account access later this year. The Emerging Payments Association has similarly issued a questionnaire to its members, the results of which will be issued in the autumn.

There is no doubt that the industry and the regulatory landscape is opening up. Despite this, barriers to entry do remain, with many FinTechs spending considerable time navigating the bank challenges on a daily basis to keep their businesses afloat.  With Brexit on the horizon, this becomes even more important for the UK to maintain its status and attractiveness as a leading FinTech hub.  Collectively we need to try to find ways to navigate and improve the access for all in this market, otherwise we risk more financial businesses moving to other markets in Europe.

Banking

Why ID verification is no longer a barrier to global growth in banking

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Why ID verification is no longer a barrier to global growth in banking 1

By Barley Laing, UK Managing Director at Melissa

Issues related to effective identity (ID) verification have restricted the global growth of both large banks and smaller challenger fintechs. With its plethora of internationally recognised IDs and verifiable private addresses, the western world is far different from much of the rest of the world, where this type of information does not exist. For example, many people in Africa and Asia lack recognised addresses. This anomaly prevents financial institutions from carrying out vital ID checks as they normally would, meaning they risk missing out on possible expansion into new and often burgeoning markets.

Proliferation of mobile

Smartphone usage is increasing in all corners of the world. Africa is no exception as the continent is  set to see another 300 million new mobile internet subscribers in the next few years. This rise offers an opportunity to financial services organisations based in the west who have been concerned about the ID verification process in countries where ID, as they know it, can be hard to obtain.

While there’s no magic bullet approach to ID verification in these countries, it’s essential to use all the sources of information the mobile device provides to inform the identity of prospective and existing customers. For example, mobile telephone numbers offer a form of digital identity as people rarely change them. These numbers can be used for dual stage verification, such as an SMS sent to the registered user’s mobile number with a unique code to complete the login to a secure website or transfer funds.

Technology is driving secure customer onboarding and ID verification via mobile. Today, prospective customers can use a merchant’s app on their smartphone to scan their identity documents – such as a driver’s licence. The scan can extract the prospect’s data from the Machine Readable Zone (MRZ), saving time while securing the correct data electronically for the financial institution. Checks can then be carried out in real time to verify the document.

The IP address of the mobile device can play a vital role in fraud prevention. It’s possible to match the location of the phone’s IP address with that of the registered owner – where they are known to live or work. If this information matches up, it’s likely the registered user is using the phone. However, suppose the device’s registered owner is based in a country different from the information provided by the phone’s current IP address. In that case, there could be fraudulent activity taking place.

But it’s not just mobile; other new technologies play significant roles in the ID process.

  • Biometrics

Biometrics, which are human physical and behavioural characteristics that can be used to digitally identify a person, are becoming a vital part of the ID verification process. Once a customer has passed the ID checks at the onboarding stage, biometrics – which can operate across all devices – may help confirm the customer’s identity with facial comparison technology. However, basic biometric services can be hackable. For example, fraudsters could obtain the photo of a customer that might enable them to gain access to that person’s account. That is why it is crucial for organisations to use a biometric algorithm that checks for eye movement as part of their ID verification process. This ensures they engage with a real live person, not a static image or avatar, to prevent fraud. Just as important is how biometrics quickly and straightforwardly enable customers to access their account or service without responding to time-consuming security questions or remembering various passwords, thereby shaping a positive experience.

  • Real-time access powers real-time decision making

When onboarding a new customer anywhere in the world, be sure to source a global dataset of billions of records. For real-time ID verification, fraud prevention, and data accuracy purposes, it should allow you to perform sufficient cross checks of the contact information provided by the prospective customers – their name, telephone number, email address, or home address. This dataset must leverage government agency, credit agency, and utility records, where possible, and access politically exposed person (PEP) watch lists.

  • Social media tells a story

Don’t forget that social media such as Facebook and Instagram provide a wealth of knowledge on those who use them. Accessing this data within the parameters of best practice data protection for ID verification purposes helps organisations identify users’ location and transactional behaviour to support the ID verification process and prevent fraud.

Evolving technology – mainly related to mobile – makes fast, accurate, and secure ID verification anywhere in the world a reality. By combining this technology with access to accurate contact data from billions of global consumers in real time, the door is open for forward-thinking financial institutions to move into new global markets and drive strong growth securely.

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Banking

Bank of Idaho Selects Teslar Software to Enhance Customer Service

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Bank of Idaho Selects Teslar Software to Enhance Customer Service 2

Partnership enables bank to spend more time with borrowers, better meet their needs

Teslar Software, a provider of automated workflow and portfolio management tools designed to help community financial institutions thrive, announced today that Bank of Idaho selected its platform to improve productivity, freeing lenders to spend more time with their borrowers and improve service to the community.

Bank of Idaho is a business-focused bank that is one of the top SBA lenders in the state of Idaho. The bank first partnered with Teslar Software to leverage its automated workflow and portfolio management tools across its entire lending portfolio.  It selected Teslar’s portfolio management, loan review, construction management and exception tracking solutions.

During the implementation process, Teslar’s technology made an impression, specifically its automation capabilities, so the bank felt it would be beneficial to also leverage Teslar PPP Forgiveness to help its businesses more efficiently navigate the PPP forgiveness process.  Known as “the bank with a heart,” supporting community businesses with PPP loans has been a natural fit for the institution. And, Bank of Idaho hasn’t just helped its current customers; of the 1,200 applications processed, nearly 50% were new relationships.

“Teslar’s automated workflow and portfolio management tools are changing the trajectory of our organization,” said Jeff Newgard, CEO and president of Bank of Idaho. “The streamlined, modern processes are improving our customer experiences and allowing us to build stronger relationships. We’re building a frictionless banking experience that can help businesses in our community get through this difficult time and grow with our support and attention.”

Leveraging Teslar Software’s platform will enable the bank’s lenders to spend less time bogged down with traditional, manual processes and more time engaging with borrowers. They’ll also be able to increase visibility and communication across departments and can better serve customers and cross-sell.

“Bank of Idaho prides itself on taking a consultative approach to customer service,” said Joe Ehrhardt, CEO and founder of Teslar Software. “The bank truly cares about its customers and effectively helping them. Through partnering with us, they’ll be able operate more productively and empower their bankers to focus more on forming meaningful relationships with their customers, which is more important today than ever before.”

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Banking

Turkey’s Akbank Will Use FICO Optimization to Build Value in Credit Card Portfolio

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Turkey’s Akbank Will Use FICO Optimization to Build Value in Credit Card Portfolio 3

Akbank’s teams will also use FICO’s advanced decision optimization capabilities on a range of business problems

Highlights

  • After a competitive search, Akbank chose FICO to optimize its consumer credit card limit decisions for new and existing customers.
  • Akbank also plans to use the same optimization technologies in solving different problems such as setting loan amount and price, and customer credit limits
  • FICO is also working to futureproof the bank’s risk management growth by training in-house Akbank team on the optimization methodologies and action-effect modelling.
  • Akbank’s strategy is to establish an optimization centre of excellence.

Global analytics and decision management provider FICO is providing decision optimization software to manage the growing consumer credit card portfolio for one of the biggest Turkish retail banks, Akbank.

More information: https://www.fico.com/en/products/fico-decision-optimizer

FICO has a global pedigree in credit limit management optimization projects, and many of the world’s leading financial institutions use its optimization technology. Akbank will tap into this depth of experience to create an optimization centre of excellence. Akbank has tasked FICO to train an in-house team so they can build their own applications for other areas,  such as loan amount and pricing optimization, customer-based limit optimization and restructuring optimization.

FICO will configure and develop sophisticated “action-effect” models for Akbank’s retail lending team using FICO® Decision Optimizer to manage their initial credit limit assignment and the on-going limits for Akbank’s consumer credit card portfolio.  The action-effect models project customer responses to offers in order to determine the best offer for each customer.  These will be configured into the optimization framework, allowing the Akbank team to choose an operating point that meets their objectives and constraints.

Serhan Pak, Akbank’s senior vice president, Retail Lending, said: “We view optimization as a strategic tool for Akbank, as we build on excellence in credit analytics to reach our strategic goals. The robustness of FICO’s analytic technology and the fact that their optimization applications are in use worldwide made them a natural choice for us.”

Emre Unlusoy, regional director for Turkey & Balkans at FICO, said: “Akbank is aiming to improve profitability, market share and revenues while decreasing non-performing loans. This is an ideal use of optimization, which brings together analytics, decision logic, mathematical optimization and domain expertise.”

FICO® Decision Optimizer enables business analysts to develop, assess and improve the decisions that drive customer interactions and business results. Users can test decision strategies for the optimal results that balance trade-offs between cost, risk and reward, by factoring in dynamic economic and market conditions.

Akbank’s mission is to be the leading bank that drives Turkey into the future. The bank has grown to over 750 branches and employs more than 12,000 people.

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