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How Fintechs with Tight Budgets Can Keep Regulators Happy Without Sacrificing Customer Experience

As diverse as the fintech sector is, the grand unifier driving innovation, disruption and growth in almost every fintech business is customer experience. From Monzo to Mojo, fintechs are born from a frustration with the customer experience offered by incumbents.

But, unlike many of Silicon Valley’s most exciting tech startups, fintechs are up against heavy regulation. Keeping customers and regulators satisfied is a challenge, and both are crucial to fintechs’ success and sustainability.

What’s more, incumbents are starting to adapt. They’re already well versed and comfortable with regulation, but now they’re being forced to innovate or else lose market share to fintechs. If they’re successful, fintechs may begin to lose their edge.

And so the challenge for fintechs is to find cost-effective solutions to burdensome regulatory challenges that won’t come at the expense of great customer experiences.

The problem may sound insurmountable, especially for fintechs and startups working with limited budgets – but compliance and user experience are both in the interests of consumers and don’t have to be at odds. In reality, they’re not.

Global identity data intelligence experts, GBG, have a range of solutions designed to help organisations of any size and budget to deliver frictionless, compliant customer experiences.

The challenge for fintechs is to find cost-effective solutions to burdensome regulatory challenges that won’t come at the expense of great customer experiences.

Great expectations

Consumer expectations are higher than ever before. According to Salesforce research, 76% of users are prepared to take their business elsewhere to find experiences that meet their expectations. 

With such high demands, fintechs must be careful not to scare potential customers away as they attempt to meet their regulatory requirements, and that starts at onboarding. 

For those that get it right, there are significant rewards to be reaped. 

McKinsey research found that for every one-point increase in onboarding satisfaction on the ten-point Net Promoter Score scale, there was a 3% uplift in customer revenue. For a business onboarding $500 million worth of new customers, this small increase in customer satisfaction could be worth $15 million. It stands to reason that a poor experience could have the opposite effect.

But even if there were no financial rewards for a great onboarding experience, the risk of abandonment is reason enough to want to get it right. 

According to Javelin Strategy & Research, 38% of millennials have abandoned mobile banking interactions because of long and poorly designed processes. Meanwhile, Sale Cycle reported that 76% of all online registrations are abandoned.

A poor onboarding experience can cost you customers – potentially to your rivals, which means there are competitive and reputational costs to getting it wrong.

The customer challenge is clear and present but the regulatory challenge is complex, multi-faceted and evolving.

Clear today, wrong tomorrow

Great UX today can fail to meet compliance requirements tomorrow – it’s the nature of the regulatory landscape.

Staying ahead of the UX game in fintech means keeping yourself up to date with the latest changes in regulation, and there are three big changes that fintechs need to be aware of.

The customer challenge is clear and present but the regulatory challenge is complex, multi-faceted and evolving.

The fifth iteration of the Anti-Money Laundering Directive (AMLD) takes effect from January 2020. It’s called 5AMLD and it builds on 4AMLD to further combat the financing of terrorism and make financial transactions more transparent.

5AMLD will affect fintechs in three main ways: tighter Customer Due Diligence (CDD) checks, beneficial ownership registers and new rules around Politically Exposed Persons (PEPs).

Firstly, it’ll mean markets that never used to be affected by AMLD will now fall under its scope. This includes: prepaid cards and mobile wallets, payment service providers with customers who make remote payments over €50, states outside the EU and firms handling cryptocurrencies, estate agents, free ports and art dealers.

All will face new or stricter CDD checks.

Secondly, firms will have to perform strict and frequent CDD and Know Your Customer (KYC) checks on beneficial owners of corporate and other legal entities.

Thirdly, 5AMLD will force EU member states to draw up lists of PEPs. These lists won’t name individuals, but enhanced CDD checks will be required when there’s a match against a job function in the registers.

Darnell Walker, Head of Fintech at GBG, said: “AML regulations can introduce friction, but high quality data and agile analytics are key to balancing customer experience with AML obligations”.

The Revised Payment Services Directive (PSD2) will change financial services in September by facilitating Open Banking, which is a huge opportunity for fintechs.

Allowing third parties to make peer-to-peer transactions using open APIs comes with new regulatory requirements in the form of Strong Customer Authentication (SCA).

GBG has a range of solutions to the UX challenges presented by ever-evolving regulations that work for businesses and budgets of any size.

Again, this has the potential to add friction, which means fintechs should think carefully about what they implement and how.

Finally, and most familiar to fintechs, is GDPR. It requires firms to get consent for the data they collect, be clear about what they collect and up-front about how they use it. Companies in all sectors have been forced to consider how best to achieve GDPR compliance in a way that doesn’t impair customer experience.

6 ways to stay ahead

Follow these six key principles to ensure a great, compliant user experience:

  1. Think about how you can fold new technologies into your processes to meet your regulatory obligations. For example, can you verify a customer’s address by analysing their location via GPS? Remember to think about your customer’s attitude to new technology to minimise abandonment.
  2. If you operate across borders, be sure to account for international variations. You need to be certain all potential customers can verify their identities on your platform, which means you’ll need to consider differences in documents from country to country and the differing regulatory requirements in each territory.
  3. Keep your UI as simple as you can. Users won’t tolerate spending a long time verifying their identity just to use your service – they’ll look for a better experience elsewhere. The best way to reduce the time it takes is to implement a simple, intuitive design backed by efficient technology.
  4. Motivate customers who are on the fence about your products and services with visual and contextual feedback that will guide them through the onboarding process. Use progress bars to show them how close they are to finishing, validate their responses to show them they’ve inputted what’s required and help them to complete the checks as much as you can.
  5. The onus of meeting regulatory requirements is on your business, so be careful not to pass it on to your customers. Don’t frustrate your users with complicated verification processes. Instead, make onboarding as seamless an experience as possible.
  6. Test your products to make sure they’re as easy and enjoyable to use as you’ve designed them to be. However many steps you take to remove friction from your onboarding experience, the proof is in the pudding. Do as much usability testing as you can to prove your UX works.

Cost-effective tech solutions

GBG has a range of solutions to the UX challenges presented by ever-evolving regulations that work for businesses and budgets of any size.

Their fast and simple onboarding experience, combined with regulatory rigour, means you can win customers with no compromise on compliance.

And their unique, expansive data partnerships empower you to onboard customers from around the globe quickly and compliantly.

What’s more, their flexible risk profiles allow you to optimise your identity verification process to maximise the number of good customers you sign up and minimise the time you waste on less viable customers. GBG’s layering of ID documents, data, biometrics and human review gives you the insights and accuracy you need.

GBG’s solutions already help the likes of Stripe, Plus 500 and Admiral Markets to meet compliance requirements without compromising on their UX.

Learn more by downloading the whitepaper: The Future of Identity Verification UX at www.gbgplc.com/cx-whitepaper.


  • Editorial Director of the The Fintech Times

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