A women scanned thoroughly, symbolizing know-your-customer procedures

What is KYC: An Overview for Fintech Companies

KYC, meaning Know Your Customer or Know Your Client, refers to the processes conducted to verify the identity of a customer and assess the risk of the business relationship with them. 

KYC is a crucial regulatory requirement for fintech companies and other institutions with financial responsibilities (like banks, credit institutions and insurance providers). Laws and regulations oblige those actors to validate the identity documents their clients provide. That’s equally true if the clients in question are legal entities instead of persons. KYC also requires companies to evaluate the clients’ financial status and monitor their monetary accounts for suspicious transactions. 

The goal: Adhere to Anti-Money Laundering (AML) and Countering the Financing of Terrorism regulations, prevent fraud and constrain the access of users, who don’t fulfil certain standards of credibility.

But Know Your Customer policies are not just boundaries. They also act as competitive factors. KYC yields insightful data on one’s own services and customers.

It thus helps establish a reputation as a secure and trustworthy company as well. And trust is likely the most valuable asset for any financial business today.

So it’s time for a deeper look into the meaning and definition of KYC, its chances and its challenges. 

This Know Your Customer Introduction for Fintechs Contains:

  • A definition of KYC
  • A discussion of key KYC-related concepts such as AML or EDD
  • An overview of legacy KYC procedures and their modern counterparts
  • A list of typical challenges fintech companies face with KYC

Now, shall we? 

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A picture of the "chance" square on a Monopoly board, symbolizing the opportunities of re-built payment systems

Why You Should Change Your Legacy Payment System

You have a big problem with your payment system. 

At least that’s why we suppose you read this article. 

Maybe your business just started, but the payment system you integrated already struggles to meet customer expectations. Or you run an established platform, but your legacy system has grown into an inflexible and costly monolith of different providers.

If you work with a particular provider like PayPal or have integrated a variety of individual acquirers or PSPs, you cannot excess full control over your payment. For example, feature updates, security or transaction limits and fees lie outside your agency. 

However, perhaps your transaction system runs just fine, it is functional and flexible. But have you utilized its full potential yet? Have you thought about adding e-money wallet functionalities to enable P2P transactions, loyalty point systems or quick refunds? 

Whatever of the above is the case, this article is for you. It will discuss how you can turn your legacy system into a version that better suits your needs. By finding a proper payment solution provider and adding payment orchestration and e-wallet functionalities, you will be able to take back control. 

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An assemblage of violins, symbolizing payment orchestration

What Is Payment Orchestration (And Why Have It)?

Payment Orchestration describes the process of integrating and handling different payment service providers, acquirers and banks on a single, unified software layer. The Payment Orchestration software executes the complete payment processing, from validation to routing to settlement. 

The Payment Orchestration Layer / POL (or Payment Orchestration Platform / POP, respectively) bundles user and merchant accounts, acquirers, payment providers, fraud detection services, etc. to initiate, validate, route and process transactions involving those parties. In addition, it handles payment processes such as reconciliation, billing and settlement, payouts and reporting. 

Thus, a Payment Orchestration Layer acts as the entry point and core of a payment system. This approach differs tremendously from separately integrated PSPs. E-commerce platforms and online service providers don’t need to integrate every PSP and every acquirer separately. Instead, they can consume the unified API of the payment orchestration layer, benefiting from a reduced integration complexity. Moreover, a POL simplifies the maintenance and further development of the system for platform owners and for merchants. In the same vein, it eases the interaction with 3rd party service providers.

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A hand holding a handy, on which a stock market app is running, representing the SPAC investment type

Opinion: What the ICO Hype Can Tell Us About SPACs

Hypes are a good thing. No, think about it: They generate attention for products, activities and ideas. And where there is attention, there is scrutiny, too. The humming of the mainstream buzz makes us turn heads and observe closely where the noise is coming from. 

Matthias Gall, co-founder of trimplement
Matthias Gall, co-founder at trimplement, analyses the potential and possible drawbacks of Special Purpose Acquisition Companies.

For the hype-sensitive stock market, this has proven a boon in many cases. Wall Street is loud, and the more volume an investment trend generates, the more it will catch regulators’ interest – besides that of eager venturers. And currently, one investment trend generating much noise is that of SPACs. 

SPACs (short for Special Purpose Acquisition Companies) stood on the sidelines of the stock markets for a few decades. But in recent years, they made a comeback in the investment mainstream – mostly thanks to the web. And there, I could not help but think of another social-media-driven hype of the 2010s: ICOs. 

In fact, SPACs already show the same signs of overvaluation and ultimately disintegration that have befallen ICOs a few years back. But will SPACs go down the path of the ICO? 

In this article I will try to answer this question and a few more, like: 

  • What are SPACs? 
  • Why are they popular?
  • What are their risks and disadvantages? 
  • Is the SPAC hype comparable to the ICO hype? 

Okay then, here goes: SPACs, the specifics… 

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A picture of a Thomas Tittelbach, giving his opinion into the European Payments Initiative

Finquiry #3: Thomas Tittelbach on the European Payments Initiative (EPI)

One key goal of the European Union is to establish a unified economic and financial system. Yet, in terms of payment schemes, the Union presents fairly non-uniform today. Regulatory reforms like SCT Inst and PSD2 have only laid the foundations of a profound rebuild of the European financial system. Today, the EU’s financial landscape is still characterized by national payment systems and dominated by US card schemes like Visa, Mastercard and PayPal. 

With the launch of the European Payments Initiative (EPI), this shall change. EPI – formerly also known as Pan-European Payments System Initiative – aims to establish a payment scheme and interbank network that’s applied throughout Europe.  

However, while backed by the European Central Bank the initiative is also met with scepticism. For our fintech interview series “Finquiry” we have spoken with payment and business development expert Thomas Tittelbach about the chances, risks and prospects of EPI. 

Our Guest: Thomas Tittelbach, Managing Partner at aye4fin

Our interview partner Thomas Tittelbach has been a force in the international payment industry for over 20 years. As a serial entrepreneur, he has co-founded and directed the payment companies omba and Payreto and acted as Head of Payment for Clickandbuy. Currently, he applies his extensive skills in P&L, operations, product and partner management as well as his in-depth knowledge of fintech, payment orchestration and business strategy at aye4fin as a Managing Partner. 

Thomas is also a member of the Associate Committee of the CNP Payment Forum. 

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A car computer of a modern car, presenting digital content and e-commerce options

Automotive Payment Solutions – Fast Lane to Car Maker Success

The future of automotive will not be about how fast your car can go. Or how snappy it can look. Instead, innovation will centre around what a car can do. As a manufacturer, you already witness the shift towards connected vehicles with high-end telematics and web-enabled computers under the hood. Those cars can communicate with external e-commerce applications and service platforms.

And that comes with technical challenges. One of the most pressing for car manufacturers: Providing a solid automotive payment system to handle all in-car commercial activities. 

One may be tempted to turn to the obvious choice: Turn-key payment software by 3rd parties. But once you scale up, the drawbacks surrounding such off-the-shelf solutions begin to show.

The alternative would be to choose the payment orchestration model and build up your very own connected car payment infrastructure. You can bring in a business and/or a software partner with experience in the automotive payment domain to support you there.

This article will help you answer, whether this approach fits your business. It discusses: 

  • Which use cases require connected car payments?
  • What are the advantages of custom-built automotive payment solutions over standard 3rd-party payment systems?
  • How will you benefit from payment orchestration? 
  • Where to find competent technology partners to support you?

Let’s go for the answers! 

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Opinion: The NFT Craze on the Art Market

Intro

trimplement co-founder Natallia Martchouk
trimplement co-founder Natallia Martchouk shares her thoughts about the NFT-based art

Everyone and his dog have been talking and writing about NFT (non-fungible tokens) in the last couple of months. I don’t know where exactly this hype is currently coming from. NFT is not a new concept, it has been around for a couple of years already. 

Back in February 2019, I wrote an article about different use cases of blockchain technology in art, which also mentions a couple of older non-fungible token projects like Crypto Kitties or Rare Pepe Trading Cards, so-called digital collectibles. In October 2019 we even started our very own NFT project Value Manifesto together with the art historian Timo Niemeyer, mechanical engineer Matthias Frank and producer of Nixie Tubes Dalibor Farny.

So, nothing new under the sun. But suddenly everybody is talking about the NFTs and NFT-based art is being sold for tens of Millions of dollars. It looks like the concept of certification of art ownership on the blockchain is suddenly lightning-fast going mainstream. However, what currently happens in the art market, rather reminds me of the famous dot-com bubble at the end of the 1990s. Let’s have a closer look at the events of the past few months.

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A computer besides a wallet, symbolizing payment gateways, online payment and ewallets

E-Wallets or Payment Gateways – A Comparison

When we compare e-wallets or payment gateways to payment with card or cash, we often evaluate the former as more convenient. That might be a bit of an overstatement, really. Holding your credit card in front of a card reader does not exactly sound like much work, does it?

No, what really makes modern digital payment methods so powerful is their feature-richness and flexibility. For example, you can simply conduct cross-border payments or transfer tiny amounts of money with digital payment methods. And even if you are bound to our own four walls (for some reason), you can pay for goods and commodities with just a few clicks. 

But payment does not equal payment. Behind the scenes of your checkout page, in the technical profundities of the software, it makes a huge difference whether the payment happens via an e-wallet balance or a digital bank or credit card transfer, facilitated by a payment gateway. 

Payment Gateways vs. E-Wallets? Not Quite!

However, make no mistake and don’t take “Payment gateways or e-wallets” literally. The two are not exact opposites: You need PGs to process a transaction no matter what. The real question is: How exactly does using e-wallets vs. regular payment providers influence the payment process, especially regarding user experience? 

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A robot hand holding a vintage ladies' wallet, representing electronic wallets or e-wallets, respectively

What Is An E-Wallet – Definitions and Technical Distinctions

E-wallets are software programs which securely store data. This data is needed to enable the wallet owner to conduct payments online or at points-of-sale. And they do so by use of a specific device.  

That’s as close to an encompassing definition of e-wallets, or electronic wallets respectively, as we will probably get. But it’s also just the surface of what electronic wallets – sometimes also called digital wallets or (obsoletely) cyberwallets – can do. Over the last decade, e-wallet technology has found application to a variety of use cases. This article will cast a light on the term E-wallet, especially in the context of online payments. In the following paragraphs you’ll find: 

  • Definitions of certain types of e-wallets 
  • An overview of their common functionalities 
  • A breakdown of e-wallet-based payment 
  • An outlook on their role in the future of payments and e-commerce
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Two hands with medical gloves handing over a banknote, representing fintech during the corona year of 2020

How 2020 Changed the Fintech Industry – Trends and Developments

What a year… good thing, we have a new one in replacement. 

Last December, when putting together our annual industry recap articles (you can find some of them here if you are in for nostalgia), we could not have guessed that the fintech scene would be on the brink of profound change. Many predictions, fintech and banking experts had made for 2020, did not occur – or did not occur for the reasons that we assumed would provoke them. 

Everything considered, though, the financial industry got off cheaply in 2020, when compared to other industries. Some branches could even step up their game. 

The question now is, if the fintech trends of 2020 will continue in 2021 or if they will “return to form”, once the restrictions in worldwide trade, business and retail loosen again. A look in the rear-view mirror will give us some implications. 

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