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KYC in the PSP landscape
As the financial sector is constantly facing different challenges, themes in the integrity space (such as know your customer (KYC), systematic integrity risk analysis (SIRA), transaction monitoring and fraud monitoring) are becoming increasingly important to get right, both from a regulator but also a societal perspective.
On 6 March 2020, Deloitte hosted its first FinTech roundtable on KYC in the payment service provider landscape (PSP) in The Garage. The purpose of the roundtable was to discuss relevant topics for a PSP or KYC tooling provider. Attendants included several PSPs, KYC tooling providers and professionals from several disciplines within Deloitte.
Setting the scene
After a short introduction by the facilitators, Baldwin Kramer – the partner within Deloitte who leads the Financial Crime practice – kicked off with an overview of the impact of financial crime in the world as well as in the Netherlands, followed by an interactive quiz with the audience. He provided several insights on ways to increase effectiveness in combating financial crime and emphasized the need for a political discussion on the future of the system as a whole.
The interactive session was followed by a talk from Maria van Duijvenbode. She elaborated on the regulatory requirements applicable to PSPs from a KYC perspective and explained how these requirements are applicable to a PSP.
“Due to the involvement of third parties in the payment chain, there is more security but also more obstacles and risks. As a result, the two factor authentication process has been implemented. Although this prevents the misuse or fraud by third parties, this also has impact on the customer journey of the client.”
– Maria van Duijvenbode from Deloitte Legal
Another topic on the agenda was the practical interpretation and imbedding/integrating the regulatory KYC requirements in a company’s Risk Management along with several specific areas for account information service providers (AISPs) and payment initiation service providers (PISPs) to be aware of. Stephan Ong elaborated on this part based on his knowledge from his previous work experience at De Nederlandsche Bank. During the discussion that followed, a key takeaway was that the EBA is also thinking of ways to introduce some proportionality in its Anti-Money Laundering (AML) guidelines for services with lower risk profiles.
“For PSPs – just as any other financial institution in the Netherlands – the SIRA methodology is considered the standard and should, in my view, form an integral part of the way it manages risk. With the right approach a SIRA can be an effective strategic tool instead of an administrative burden. In the end, financial institutions are all about optimizing the risk versus the rewards. But this means you need to have a clear and systematic view on your risks in order to price the risk at the right level. Otherwise, you are onboarding risks for which you will not be rewarded.”
– Stephan Ong from Deloitte Risk Advisory
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Challenges and solutions
This was followed by a group session on the challenges faced by PSPs. Groups were created consisting of professionals from the different categories such as PSPs, vendors and Compliance professionals. They were then asked to prioritize the KYC main drivers for their organization. Each group prioritized slightly different items. For instance, one group thought it was most important to comply with legal requirements, followed by customer experience. This was contrasted by another group which considered that growing its business was the first and foremost priority, followed by compliance with legal requirements. This led to an interesting and dynamic discussion between all parties that were present.
In the next part of the roundtable, different innovative tooling solutions were presented as a response to the challenges that PSPs faced. The solutions all made use of forms of advanced data analytics in order to increase efficiency and convenience. Parties that showcased their solutions were Blanco Services, MiTek Systems, and NICE Actimize. Their innovative solutions were received with much interest and enthusiasm by the audience.
Baldwin then led another discussion on the challenges faced when setting up a ‘utility’ service in the financial sector. This shed some light on the possibility of a collaboration between the private and the public sector, as seen (albeit in different models) in Singapore and the Nordics, and the role of culture within this discussion.
The event was wrapped up with networking drinks in The Garage.
What is next?
The roundtable provided an opportunity for experts and professionals from different parts of the industry to come together and discuss a variety of topics that are relevant for their day-to-day business. It provided a platform where professionals could share interesting industry insights with each other.
The FinTech roundtable is the first of a series of roundtables that Deloitte is facilitating. The following roundtables are aimed to explore the Integrity Risk theme further on aspects such as transaction monitoring, fraud detection and ultimately the SIRA. Other themes, such as Human Capital where areas such as stock appreciation rights and employee journeys, will also be on the agenda.
Are you interested in attending the next roundtable? Register on the 'sign up' button at the top right and we will make sure to keep you informed!
For more information about the FinTech roundtable, please contact Maria van Duijvenbode or Stephan Ong via their contact details below. And do not forget to register for more information about the next roundtable by clicking on the 'sign up' button in the top right.