As technology and digital services continue to ingrain themselves into the way people go about their daily lives, financial services providers need to rethink their playbook to accelerate shift to digital services and products. Thanks to taking a digital-first mentality, alternative lending startups are making a splash in the region

Leading financial services experts in developed markets such as Australia, Hong Kong, Singapore, and Malaysia are just as interested in establishing digital offerings as those in emerging markets such as Indonesia, Vietnam, Myanmar, Cambodia, and the Philippines.

Earlier this year, the Monetary Authority of Singapore (MAS) announced that it received 21 applications for the two digital full bank (DFW) and three digital wholesale bank (DBW) licenses it was offering. It’s clear that the momentum gathered by ‘digital’ financial entities is not going to die down anytime soon.

Last year, the Hong Kong Monetary Authority (HKMA) also issued virtual banking licenses to a handful of organizations, and aside from providing better services to customers, a key focus was to ensure that more people had access to financial services beyond basic savings accounts.

“I believe that virtual banks will have to offer innovative and customer-centric services in order to attract customers. Moreover, in targeting the retail public and SMEs as their main client base, virtual banks should help promote financial inclusion in Hong Kong,” HKMA Chief Executive Norman Chan said at the time.

The size of the opportunity for those starting digital operations in the financial services space is clearly significant. World Bank data indicates there are about 1.7 billion adults in the world that still don’t have access to banking and financial services at all.

A significant portion of that unbanked population is in the APAC region. Since they increasingly have access to smartphones and the internet services, they’re within reach for the online financial service providers, but these service providers first need to tackle the challenges of onboarding customers remotely.

Challenge #1 | Compliance with evolving KYC and AML laws

Identifying and verifying the identity of those remotely accessing financial services, whether it is a savings account, an investment, or a loan is critical to fighting fraud and financial terrorism. It’s why regulators around the world enforce strict know-your-customer (KYC) and anti-money laundering (AML) laws.

However, traditional KYC and AML regulations fail to account for the needs of new-age financial service providers who don’t have physical offices. Conflicting guidelines and approaches among the regional jurisdictions in Asia have added to the challenge of ensuring compliance.

According to Frederic Ho, Jumio’s VP of APAC, “The key to streamlining compliance is to harmonize regional KYC and AML regulations and enabling banks, of all stripes, to offer AI-empowered identity verification — this would go a long ways to onboarding more users, reaching new markets, and boosting financial inclusion.”

Of course, regulators in the APAC are responding to these digital changes. Singapore, Indonesia, Hong Kong, Malaysia, and many other countries in the region are exploring the idea and discussing the best way forward with vendors, partners, industry players, and other stakeholders.

Challenge #2 | Ensuring a seamless, streamlined, simple online onboarding journey

Providing positive onboarding experience will set the tone for your ongoing relationship with customers and has an impact on your overall brand perception.

Unfortunately, many companies are still focusing their eKYC processes on meeting AML and KYC requirements and neglect the user experience. Finding a balance between regulatory compliance and customer experience is a challenge that financial services providers need to tackle.

According to technology company Jumio, 40 to 50 percent of customers abandon sign-up during online onboarding because of the long and clunky process. Jumio offers an end-to-end AI-powered online identity verification solution to help companies in the financial space provide a seamless experience for online customers during account sign up while ensuring compliance with evolving AML and KYC regulations.

From the perspective of a customer, signing up for a new service takes a leap of faith in the first place. Lags, delays, and errors during the onboarding process are bound to upset customers and cause them to rethink their decision.

‘Maybe the app isn’t going to work as promised — I should quit trying’ is perhaps the thought in the prospective customer’s mind.

Digital banks and financial services companies need to re-assess their KYC processes and the technologies used to provide smooth and reliable online identity verification during onboarding while staying compliant with regulatory requirements.

Challenge #3 | Combating fraud in an increasingly sophisticated space

Operators in the financial service looking to provide exciting digitally-focused value propositions need to ensure they’re able to combat online fraud committed by tech-savvy attackers.

While businesses across industries could be hit, financial institutions have been prime targets for fraudsters because of the available money that can be stolen.

The sheer number of data breaches around the world, from British Airways to Marriott, have actually made life easy for hackers as login credentials, secret questions and answers, credit card information, passports, as well as other identity verification and authentication documents can often be found online or on the dark web.

This data is often packaged neatly into bundles and sold on the dark web for just a few dollars, making identity fraud easy for even the novice attacker.  Cybercriminals often use a tactic known as “credential stuffing” to automatically inject breached username/password pairs into legitimate online accounts order to fraudulently gain access — this is often achieved through armies of bots.

More companies are turning to biometric-based identity verification and liveness detection technology to enhance protection against online fraud and account takeovers, but the reality is that these technologies are becoming less effective because hackers today use artificial intelligence and other sophisticated methods. Today’s biggest challenge? “Deepfakes”.

Deepfakes come from AI-based technology used to produce or alter video content so that it presents something that didn’t occur. From simple, static face swaps to actual long-format videos, deepfakes pose a significant problem because they spoof legitimate selfies which are often required to corroborate a user’s government issued ID document and prove that the user is physically present.

According to Jumio, deepfakes are a growing threat to the modern enterprise. To combat this threat, organizations need to rely on certified liveness detection to ensure that the user is physically present (vs. a picture of a picture or a deepfake video). Unfortunately, many methods of liveness detection, including methods which  require users to blink their eyes or look in different directions can be spoofed with basic software.

AI-powered identity verification with certified liveness detection can spot deepfakes, providing an extra layer of security pointless.

Jumio believes financial institutions in the digital space should focus on business

Mobile banking and payment usage is rising in the APAC and Jumio is making it easy for organizations in the financial services space to digitize and scale up globally, by providing a fast and reliable way to verify the digital identities of users around the world.

Many startups are keen to enter the space and make an impact but are challenged by the complexities with AML and KYC compliance, and the need to roll out eKYC solutions.

Jumio helps fast-paced startups such as Monzo and traditional leaders focusing on digital (such as CIMB Bank Philippines and HSBC) leverage artificial intelligence (AI), machine learning, face-based biometrics, and certified liveness detection technology, to quickly and accurately validate their users’ digital identity, while staying AML and KYC compliant.

“Our partnership with Jumio has been integral in achieving our milestones so far as an all-digital bank in the Philippines to deliver a safe and secure banking experience. We are very grateful to have them as an ally in bringing Filipinos closer to financial inclusion,” said CIMB Bank PH CEO Vijay Manoharan recently.

Jumio’s solution supports more than 3,500 identity types around the world, helping enterprises serve an increasingly international customer base. Because Jumio processes hundreds of thousands of transactions every day, they can leverage the massive verification data sets and AI to spot patterns and better detect fraudulent ID documents.

Jumio integrates NIST/iBeta-certified liveness detection technology to its online identity verification solution to ensure that the person presenting ID is indeed physically present during the transaction and not using a photo, video, or realistic 3D face mask. This strengthens defenses against growing threats such as deep fakes and other advanced spoofing techniques.

Companies partnering with Jumio trusted that they can provide a great user experience and onboard customers without losing them.

According to metrics supplied by Jumio, its AI-powered identity verification solution has helped clients improve conversion rate by more than 50 percent.

If you’d like to learn more about Jumio’s solutions, check out its website or reach out to a representative online, now.