A Challenge for FinTechs: Ways to deliver high-quality customer experience while keeping regulators happy

The FinTech sector is highly diverse with all of its companies driving innovation, disruption and growth forward. From Monzo to Mojo, numerous FinTechs stem from high frustration with the level of customer experience offered by traditional players. Unlike other emerging tech companies, FinTechs have to develop in a strict regulatory environment. In those conditions it is challenging to live up to the expectations of the customers. A balance between the two is key to FinTechs’ future success and sustainability. Meanwhile, old-school companies are well adapted to the regulatory conditions, but face the need to incorporate innovative technologies into their core in order to remain competitive.

The challenge for FinTechs is developing or acquiring cost-effective solutions to deal with regulatory burden, while maintaining top-level customer experience.

This might seem as a doable thing, but not in the case when you are operating with a limited budget. However, global identity data intelligence experts (GBG) have a selection of solutions designed to help companies of any size and budget stay away from putting the user-experience at the odds.

The Rising Expectations

Today, consumer expectations are higher than they’ve ever been. A research conducted by Salesforce showed that as much as 76% of customers are constantly ready to change service provider, switching to the one that better meets their needs. FinTechs must find a way to do so starting from the onboarding procedure, which is where regulatory constraints begin. Even if the rewards for putting in place a great onboarding procedure are insignificant on a large scale, the risk of loosing customers to your competitors is too high to put it at stake. For instance, Javelin Strategy & Research has concluded that 38% of millennials have ceased mobile banking interactions because of long and badly designed processes.

While the customer challenge is quite clear, the regulatory one is complex and multi-dimensional. The user experience your customers get today might not be compliant with the tomorrow’s regulatory landscape. You must always keep yourself updated on the latest changes in order to ensure stable performance. The fifth version of the Anti-Money Laundering Directive (AMLD) is about to take effect from January 2020. It is aimed at continuing to combat the financing of terrorism and increasing the transparency of financial transactions. The main points of Directive’s attention are Customer Due Diligence (CDD) checks, beneficial ownership registers and new rules around Politically Exposed Persons (PEPs). This means that the markets that have prior been untouched by AMLD, such as prepaid cards and mobile wallets, certain payment service providers, firms handling cryptocurrencies, estate agents, free ports, art dealers etc., will now face the need to adjust their operation to the regulations. Stricter and more frequent CDD and Know Your Customer (KYC) checks on beneficial owners of corporate and other legal entities will have to be put in place. High quality data and precise analytics will be the main components for maintaining a balance between customer experience and AML obligations. At the same time, the revised Payment Services Directive (PSD2) will bring changes to the financial services industry by facilitating open banking, making it a great opportunity for FinTechs. Third parties will be authorized to make P2P transactions using open APIs, yet they will simultaneously be subject to new regulatory requirements regarding Strong Customer Authentication (SCA).

Last, but not least, the GDPR, which requires firms to obtain consent for collecting personal data and be clear about what exactly they collect and the ways it will be further used. Companies operating in all sectors are facing a challenge of staying GDPR-compliant, while maintaining a solid customer experience.

In a nutshell, it is highly important for FinTechs to assess the systems and procedures they have in place, revise them and upgrade if necessary in order to keep the regulatory institutions and the customers happy. No matter the budget, there are ways to optimize operation even when there are little resources available. After all, it is important to apply innovative and efficient tools and solutions not only to the products created, but to all the layers of a business.