Regulation

IdentityMind On The Need For FinTech Compliance Marketplaces

Compliance and risk? The top of any FinTech’s to-do — and to-keep-doing — list. Automating that compliance is now a “need to have.”

The age of technology is, of course, well upon us, with Software-as-a-Service (SaaS) a key conduit to making sure that at least some business operations — once the province of spreadsheets and reams of paper — can be streamlined. However, in some ways, we are in uncharted territory. The regulatory environment is fluid enough that things seem to change daily, depending on where one looks.

Take cryptocurrencies, for instance. Here today, gone tomorrow and, in some countries, total non-starters. The initial coin offering (ICO) is lauded in some circles, vilified in others. Know your customer (KYC) could also mean “know your culpability.”

For FinTech firms, doing the chasing all on their own is a losing proposition. Manual processes, phone calls and self-education efforts just cannot keep up. Compliance and risk officers have the unenviable task of finding out, sometimes after the fact, that not all the boxes are checked — if they even knew the boxes were there for checking in the first place.

SaaS, the distribution model where providers offer a central location for their customers, can offer FinTech firms a way out of inefficient processes, say some supporters. Many FinTech firms operate with an on-demand mentality — services, payments and lending done 24/7, across time zones and currencies. Might an on-demand mindset benefit those tech upstarts when tackling issues like fraud and anti-money-laundering (AML)?

Call it an à la carte approach — a pick-and-pay process.

IdentityMind Global has debuted the RegTech Webstore, billed as a RegTech online marketplace that enables firms to integrate regulatory compliance functions directly into their own offerings. FinTech firms can browse and research what they need and pick it up on the fly. The store is self-serve, which means that customers can select a plugin, try a demo, pay with a credit card, and be off and running. There also is what is being billed as a “plugin knowledge base” that offers implementation and reference guides, along with videos.

In an interview with PYMNTS, Jose Caldera, chief products officer for the company, said “self-service” is a nod to a sea change among tech executives seeking to get a grasp on compliance needs.

“[FinTech executives] want to try things out now, and they want to buy it now,” he said. “They do not want to involve a salesperson in the process.”

Plugging In To Plugins

IdentityMind has come to market with two offerings: the KYC and ICO plugins.

The KYC Plugin is geared toward regulatory compliance. It’s pre-integrated with IdentityMind’s compliance and risk platform, which also features what the company terms “out of the box” rules to meet various KYC requirements.

The ICO Plugin comes amid an ever-shifting regulatory and compliance landscape that can change drastically from market to market. By way of example, Caldera noted that ICOs are banned in China, where in the U.S., they can take place with tokens classified as securities.

Writ large, Caldera said, the need for such automation and centralized corporate commerce shows that “there is a wave of new financial applications worldwide that are seeing a rise of entrepreneurs coming into the FinTech space — and they are not familiar with the complexities of the regulatory landscape, and certainly not worldwide.”

Operating across new services, such as P2P payments or crowdfunding, means some of these FinTech firms may encounter a “diverse set of jurisdictions,” he noted. “These new [payment and service] models are attracting worldwide users and they may not be connected to a specific region.”

The plugins do not replace the need for firms to employ and deploy risk professionals, but they can help automate some functions. IdentityMind’s role in that marketplace shows a “behind the scenes” mindset that can add value to FinTech firms. Speaking to the back end, he added, firms like IdentityMind are “putting together all the settings and rules that meet different regulations and policies that are required,” and have dedicated staff in place to be aware of, and inform users of, changes in regulations and compliance mandates.

“So then,” he said, by way of an illustrative example of a FinTech working with a RegTech, “you can turn to us and ask about what the regulations are in Singapore or Canada, and we can respond with the rules that are specific to that country. … This is something that can be very enabling to a business, as now they can actually offer their financial services worldwide.”

The guiding principles of offering easy-to-use interfaces and plugins to users globally “is very important,” Caldera said, “as we can reach out and enable [FinTech firms] to deliver their most fundamental value: financial inclusion.”

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