Category: Banking

Welcome to our specialized banking category, an expertly curated space where we delve into the exciting world of digital transformation sweeping across the banking industry. Our insightful articles explore a multitude of facets that are actively shaping the future of banking, from the disruptive force of cutting-edge technologies to the shifting paradigms of customer expectations.

As the terrain of the sector undergoes continuous evolution, it becomes increasingly crucial for industry professionals, enthusiasts, and observers to keep abreast of the latest developments and trends. Our in-depth articles serve as a resource, providing valuable insights into how traditional banking institutions are navigating the transition to the digital age, and how emerging fintech companies are spearheading innovative solutions that are redefining the industry’s contours.

Our coverage encompasses a wide array of topics, from the convenience and the ubiquity of digital payments to the transformative impact of regulatory technology and the paramount importance of data security. This comprehensive exploration offers our readers a panoramic view of the digital banking ecosystem. Our overarching objective is to equip our readers with a nuanced understanding of the challenges that lie ahead, as well as the opportunities that digital transformation brings to the fore.

So, immerse yourself in our curated content, enrich your knowledge, spark meaningful conversations, and stay ahead of the curve in this digital banking era. Join us in exploring the captivating world of this sector where the only constant is change. Welcome to the future of banking, with us!

Regulations & Revenue- How Digital KYC For CASA Can Be A Relief For US Banks

Posted on | by Signzian

Introduction

KYC (Know Your Customer) has become a crucial part of the financial framework in America. Banks in the US are required to have a proper understanding of the identity of their customers. This requirement with advancing technology creates challenges for the banks in conducting KYC. The cumbersome methods of traditional KYC are becoming outdated. It is time for Digital KYC.

The solution to these problems is similar to solutions to most problems in banking. Digitizing the entire process with technology does the trick. Unfortunately, most banks overlook this and stick with more clumsy routes from tradition. More than 64% of account opening applications in 2020 Q3 were either online or through a mobile device. This was a huge jump from the previous year’s 53% during Q2-Q4. The evidence is clear on how customers are changing their preferences.

One area in banking that can benefit from digitization is CASA (Checking/Current Account Savings Account). It’s a very beneficial option for the bank as the revenue from CASA and checking accounts is high. This is because of the low interests that they offer while providing other attractive options for the customer. Unfortunately, the regulations are strict in this area and conducting effective KYC is a tedious process.

Digital KYC is useful for CASA customers and banks. With efficient implementation it will save time and effort for both parties, rendering less attrition and more benefits. A detailed look at how the machinations will reveal a better picture.

Role of CASA In The US Banking Sector

Before understanding CASA we must know the exact difference between savings and checking/current accounts:

  • A savings account is a deposit account that bears interest at a bank or any financial institution. Even though they provide modest rates of interest, they are often set against growing inflation. Nonetheless, they are safe and reliable with good liquidity. They are not very profitable for the financial institutions as they would have to provide interest to the customer.
  • A current account/checking account on the other hand has no or low-interest rates. They have safety and liquidity too. But what makes them stand out is their option for unlimited deposits and numerous withdrawals. They are also called demand accounts or transactional accounts. They are far more profitable for the banks since they can hold the money while paying no or low interests.

 

CASA combines the features of both these accounts. This will have an appealing effect on the customers to keep the money in the bank. This is beneficial for the bank as they pay no or low returns on the checking/current account while maintaining decent interest on the savings portion. It doesn’t have a specific maturity date. Thus, it is valid as long as the account holder needs it to be open. Banks always prefer customers to have a CASA or checking account than a savings account.

Even though CASA is usually a combined type of account, the term is often used to refer to both Checking and Savings Accounts together. In most parts of the world, they are used separately, but West and Southeast Asia predominantly have CASA along with the other types of accounts. Such bank accounts are located in markets with saturation and cutthroat competition. The US banking sector is headed towards such a scenario.

During the COVID-19 pandemic, the USA has seen a fall in new checking accounts in regional and community banks. The major reason was the unease of the physical process of account opening. It is noteworthy that digital banks and Large banks (like JP Morgan Chase and Bank of America) who had digital KYC and onboarding options accounted for nearly 55% of all accounts in 2019 and increased it to 69% by Q2 2020

 

Source- CORNERSTONE ADVISORS

What Happens When Banks Don’t Know Their CASA Customers?

Even though KYC helps build better relations with the customer and smoothens transactions in the long run, it’s primary objective is to prevent fraud. Several frauds may lead to money laundering and even terrorist funding. In Q1 2020 alone saw a 104% rise in financial fraud reports compared to Q1 2019. This amounted to more than 430% increase from Q1 2015.

This is where KYC comes into play. An established data on the credibility of the customer helps banks determine the risk involved in dealings with each individual. Government bodies like FinCEN(Financial Crimes Enforcement Network) and international entities like FATF play a role in ensuring AML/CFT(Anti-Money Laundering/Combating the Financing of Terrorism). But financial institutions have their responsibilities.

The Federal Government has taken certain steps to ensure this. In 2016, a rule which mandates financial institutions to verify the identities of customers was established. This was especially for legal entity clients and their beneficial owners including corporations, partnerships, LLCs and others.

Banks and financial other institutions are advised to secure from the customer:

  • The customer’s full name
  • Residential address
  • SSN(Social Security Number)
  • Date of birth.

CASA is a lucrative option for the banks. They are sometimes given lenient customer onboarding directives. This might lead to inefficient KYC procedures. Unfortunately, money laundering and other illegal activities are mostly done through checking accounts. CASA will also be subject to this as it has similar accessibility. Thus KYC for CASA is of the utmost necessity.

Digital KYC Is The Next Step…Here’s Why!

Another major factor that comes into play is the digitization of bank functions. Customers prefer remote and digital KYC and onboarding procedures to physical and traditional ones. Some of the important reasons for this are:

  • Ease of access as they can do it from their homes
  • The time required is extremely low relative to traditional methods
  • Health concerns amidst the COVID-19 scenario

In 2020 most of the US citizens preferred to access their old and new accounts through an online portal. Some of them went as far as to change their primary accounts from a traditional bank to a bank that provides uber digital access.

The biggest surge was from mobile users who found it much easier to access their bank accounts from anywhere in the world at any time they wanted to. They were literally carrying the snippet of a bank in their pockets.

From the data on fraud alone, it makes it necessary for banks to switch to digital KYC for onboarding process, combine this with the fall of new secondary checking account opening from 63% in 2017 to 24% in 2020 at traditional banks, digital KYC becomes essential

Source- CORNERSTONE ADVISORS

Source- CORNERSTONE ADVISORS

Digital KYC For CASA Operations Comes With A Plethora Of Benefits

Digital KYC is an idea that even governments are entertaining. With proper regulatory guidelines, they will be stringent and secure. It is the most efficient way to conduct KYC for CASA. As a matter of fact, it would be the most efficient method to conduct KYC for any aspect of the banking sector. The reasons for these include:

  • As the numbers of in-person account openings have fallen it is clear that customers prefer other modes.
  • As the entire populace has access to smartphones, it is only sensible to provide them with the option to create a CASA account from their mobile devices, if they wish to
  • Long Queues and formal delays will be avoided due to the virtual onboarding process
  • TAT can be reduced to a matter of hours or even minutes.
  • Health concerns amidst the pandemic are nullified as no human contact is nil.
  • Once implemented the procedure will be cheaper than traditional KYC.
  • If regulatory guidelines for Digital KYC are strictly followed, fraud risk can be reduced to a minimum.
  • With efficient and experienced third parties’ oversight, the platform can be user experience-driven.
  • Overall customer experience and satisfaction is met.

Even without any push for digitization customers are preferring all their banking processes online. KYC usually is a one time process, if enough activation enthusiasm can be generated from the customers, permanent customers can be ensured by the institutions.

Conclusion

The facts are in front of us. The citizens of the world’s largest economy prefer to go digital due to the convenience, security and safety it brings. Digital KYC for CASA in US banks is gaining importance and is becoming the need of the hour in the banking industry. It’s becoming inevitable. Perhaps, in a decade or more the entire industry would go online rendering any physical interventions either useless or extremely unavoidable.

CASA is a symbiotic option for both the customers and the financial institutions. Welcoming more customers into using it would benefit all. It is the responsibility of Such institutions to ensure that customers are attracted and easily integrated into their user-base. Digital KYC is the next step for all entities in the banking sector. Without further adieu, that is where they should head their wheels at.

 

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

Future Of Corporate Banking Automation- How Traditional Titans Can Take On Digital Startups

Posted on | by Signzian

Introduction

There was a time when Digital Startups in the US struggled to keep up with the highly resourceful Titans in Banking. But times have changed and the Davids in the industry now pose an imminent challenge to the Goliaths. One might ask how the underfunded neo-banks and startups are able to do this. The answer lies in the core essence of any business, they understand what the customer needs and aren’t opposed to banking transformation advancing technology.

Of course, there is no doubt that these little innovators are definitely not in the leagues of big banks like JPMorgan Chase & Co. or Bank of America Corp. But their maximal utilization of minimal resources makes them highly efficient. Thus their growth through the decade is evident.

As of February 2020, a total of 8775 Fintech Startups are functioning in the US. The calculated CAGR of 8.6% will continue to remain the same or close until 2024. A study reported an estimated US $880 Billion total transaction value in the digital payment space alone.

The smaller players are using their instruments to increase their value in the market. They very well know how banking transformation will help them achieve their ambitions. But we need to take a closer look at how they are using the low hanging fruits of retail banking to make their marks in the corporate banking industry.

Process Automation in US Corporate Banking

Corporate banking or business banking serves a spectrum of clientele, ranging from small and mid-sized businesses to giant conglomerates with billions in turnover. The difference between Corporate Banking and Investment Banking lies in the fact that the former is associated with financial operations and business goals while the latter is associated with raising capital for investments. It was differentiated from investment banking after the Glass-Steagall Act of 1933 but was repealed in the 1990s. Now both services are provided by multiple banks.

Corporate Banking brings in huge numbers as it is one of the key profit centers in the industry. This does come at a cost as the largest originator of loans renders it as a source of numerous write-downs for soured loans. They provide multiple services to financial institutions and corporations. Some of them include:

  • Credit products including loans
  • Cash management and treasury services
  • Equipment utilization and lending
  • Commercial real estate
  • Financial services for trades
  • Employer-Employee services

With specialized branches for investment banking, they provide services to corporate clients for securities underwriting and asset management.

Traditionally the corporate banking industry had been dominated by the old and major banks in the US. This includes banks like JPMorgan Chase & Co., Wells Fargo & Co., Goldman Sachs Group Inc., etc. But in recent times niche-specific fintech startups are on the rise and soon enough will constitute a major portion of the market. This is because of their tactical use of technology. With banking transformation, They are automating all the unnecessary manual interventions.

Automation in Banking is the system of utilizing technology to operate banking processes through highly automatic means rendering human intervention to a minimum. To have a thorough idea of the fundamentals of the topic, check out our blog post on Automation in banking.

Most titan banks have advanced from traditional automation processes to RPA methods. But even the age of RPA is over and it is time to adapt to the new norm- Artificial Intelligence(AI). With Machine Learning(ML) and additional advancements in the field, the banks have a long way to look forward to.

 

How Are The Traditional Banks Using Automation?

Most banks in this segment have been in the industry for decades or even centuries. Some of them like JPMorgan Chase & Co. and Capital One Financial Corp. adapt well to banking transformation. But most of them are too late to the game. Till the 21st century, their established presence in the country alone would have substantiated their dominance. Now, the playing field is changing with the incursion of the internet and digitizations they need to up their game.

It is also noteworthy that most top tier banks won’t be affected to a destructive level due to their enormous presence in the industry. But the ones just below them, who still stick to the traditional methods will be stricken.

The generic provisions of online banking, credit cards, and others. are no longer a luxury for the customer, but a necessity. Now the banks must provide more options to the customer. These include e-wallet payments, digital availing of loans, etc. In 2018 Statista.com reported 61% of Americans use digital banking. They expected it to rise above 65% by 2022. They also reported that 66.7% of all bank executives expected Fintechs to impact e-wallets and mobile payment methods, globally. Where the giant banks stand in this advancing fintech market is yet not definite.

People look for ease of access in areas like lending and loan applications. Even without advanced automation, the numbers are high.

 

Some important facts about the adoption of automation for the traditional banks include:

  • With a massive presence in almost all states, the giant banks have too much manpower and machinery. Most of them have over 100,000 employees to handle day to day transactions. Some Automation with a central database and RPA help lighten the load a little, but this certainly is an area of improvement.
  • Millennial customers are not keen on doing business with giant banks as the experience is not always smooth and easy. Unfortunately, most banks ignore the millennials due to their current low market involvement. But in 30–40 years time, they will be the inheritors of trillions of dollars. For that future securement, smart bankers must think now.
  • Individuals and businesses now prefer mobile-only banking over standing in a queue. This is an area where digitization is the only solution.
  • The fact that most banks are well established comes with an additional issue of maintenance. BAI(Bank Administration Institute) reported banks overpay 15–20% for real estate on an average compared to other retailers. Over a long period of time that amounts to a huge amount. This could be reduced if banks were to go remote.
  • Apart from the conventional facilities offered these banks do not have many attractive features for the customer. Even the rewards provided through credit cards are minimal.
  • The boon for giant banks is their all-encompassing nature. They are present in all spheres of financial transactions. Unfortunately, this leaves them little room to focus on specific areas. Most of the time this renders them to be all over the place.

What Gives The Fintech Startups An Edge In Corporate Banking Automation?

Previously the startup industry was mostly located in Silicon Valley. Lately, this has changed and fintech startups are booming all across the country. These startups adapt to technology through automation and digitization. Some of the way they use it to provide services to their customers include:

  • Unlike major banks, the fintech startups are primarily focused on a specific area of banking or finance. For example, Blend focuses on lending and loan sanctions for small business owners. This gives them breathing space to improve their service in that sector.
  • Since they have limited manpower, they use automation for repetitive tasks and processes. This makes the transactions swift and free of human error.
  • Since they have mostly remote accessibility and faster response they provide a better customer experience. Much time, effort, and funding is spent on making the user experience good.
  • They focus on millennial customers and entrepreneurs. The services are calibrated to entertain millennials as in the long run they know a loyal customer base from that generation will pay off.
  • The millennial population in the US will have more than 78% digital banking users by 2022. Fintech startups acknowledge this, embracing mobile-only banking, and are constantly trying to up their ease of access. Chime and Varo are good examples of successful startups in this sector.
  • Most of these startups reduce human interaction and use ML and AI technologies for processing and improvement. To avoid a detachment from comfort for the customers, Some of them go to the extent of making their offices feel like cafes instead of formal buildings. The approach encourages a more casual experience in banking than a formal one. This psychological move has a positive impact on people’s emotions since it removes general stigmas.
  • Easy access to loans as much of the bureaucracy involved is cut down with automation.
  • Startups like Brex that offer credit cards are on the rise as their rewards systems favor the users much more than other banks’. Even with high debt regret, most users avail credit cards from these providers for their attractive rewards.
  • Innovative ideas are encouraged as startups are not impeded by bureaucracy. Forwards Financing’s practice of lending money to startups and using their own technology to give access on the same day to the funds is a brilliant move. It attracts most startup owners for quick fund access.
  • Some of the startups are venturing into uncharted territories like the equity markets and even major Wall Street scenarios. Robinhood and Acorn are good examples.

 

How Can The Giant Banks ace the game with banking transformation?

The competition has moved beyond basic automation and RPA. Now the banks should focus on newer technology like AI and ML. Better procedures for onboarding and corporate transactions can be done efficiently with automation.

Specifically, the banks should expand their target audience to include the newer generations. Millennials along with Generation Zs will form the majority of the customer base within the next few decades. Learn from the startups on how to provide them with a better experience. Additional services and features will help. The startup Varo provides no-fee transactions and spending habit trackers to their customers along with other bank services. Banks should take note and bring to life such innovative ideas.

As mentioned in the beginning, top tier giants are less likely to be affected, but the banks that fall after the top ten should tread with caution. This is evident as many giants do take some sort of technology adoption to further their market. For example, the top 7 banks in the USA (JPMorgan Chase, PNC Bank, U.S. Bank, Bank of America, BB&T, Capital One, and Wells Fargo) came up with the app, ‘Zelle’. It’s an exclusive digital payments network for these banks.

Capital One also took a step to remove the formal feeling of visiting a bank with a more laid-back type of ambiance by setting up their offices like cafes.

But these initiatives are exclusive to the elite titans. The lesser giants will have to fend for themselves. As most startups pose a competition for them, it is only sensible to collaborate with international companies for digitization and automation. The expenses will be reduced while getting dependable manpower for set up.

Conclusion

In essence, the financial market is more competitive than a couple of decades ago. With emerging technology and even more innovative ideas, traditional methods must be upgraded. With AI expected to power 95% of customer interactions in the coming decade, the banks need to act fast.

Even in the Stock Market Robo- Advisors intend on managing more than $2 trillion in assets in the coming year. Thus all-encompassing banks require to adopt the new methods. If they don’t, in the coming 30–40 years will be the diminishing of their lights. But this is the time to act. Including new partners from overseas and implementing new ideas will help the giant banks to fly high. While the concept of banking transformation has, both, pros and cons, moving forward automation is the way forward for US corporate banks in the years to come.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

ENACH

Evolution of ENACH

Posted on | by Signzian

The journey of ENACH (Electronic National Automated Clearing House) is a testament to the evolving landscape of digital financial transactions in India. As we increasingly transition to a cashless society, the need for efficient, automated, and secure payment systems becomes paramount.

The centralized payment/transaction processing system was launched on 30th June 2019. The launch was done by the National Payments Corporation of India (NPCI). National Automated Clearing House (NACH) has been constructed for banks, corporates, financial institutions and the Government. It enables you to easily manage recurring payments across multiple banks. It assists you to manage payments of utility bills, SIPs, premiums, donations, Credit Card bills etc.

NACH was set up to serve as a faster and efficient platform for clearance.

NPCI — The Driving Force Behind ENACH

The NPCI was formed by the Reserve Bank of India (RBI) in collaboration with the Indian Banks Association and ten promoter banks. The ten promoter banks are SBI, ICICI, HDFC, PNB, Citi, HSBC, Canara Bank, Bank of India, Union Bank of India and Bank of Baroda. NACH is NPCI’s product offering. Its objective is to replace the existing ECS systems across the country.

With the implementation of the NACH system, NPCI intends to provide a single set of rules for businesses. It also allows for .open standards and best industry practices for electronic transactions. These are common across all the participants, Service Providers and Users, etc. NACH system also supports Financial Inclusion measures initiated by Government, Government Agencies and Banks by providing support to Aadhaar based transactions.

The NACH system enables the member banks to design their own products. It also addresses the specific needs of the banks & corporates. These include a refined Mandate Management System (MMS) and an online Dispute Management System (DMS). The last one is coupled with strong information exchange and customized MIS capabilities.

The NACH system provides a robust, secure and scalable platform to the participants. It has both transaction and file-based transaction processing capabilities. It has best in class security features, cost efficiency & payment performance. All these are coupled with a multi-level data validation facility. It is accessible to and from all participants across the country.

Know Your NACH — Its Evolution & How It Helps

NACH was a system introduced by the NPCI, for interbank, high volume, electronic transfers. These were periodic in nature.

NACH Over ECS — What Was The Need

NACH creates a better option for facilitating clearing services. It is more efficient than the existing Electronic Clearing Service (ECS) system.

NACH is a centralized, web-based clearing service that facilitates services for banks, financial institutions, the government and corporates. It consolidates all regional ECS systems into one national payment system. This helps by removing any geographical barriers in banking.

The most evident difference between NACH and ECS is the method by which the system makes a transaction. Electronic Clearing System (ECS) is a time-consuming method for electronic transactions. Whereas NACH is an online-based transaction system working on the basis of Core Banking Solutions.

Validation is another issue that was majorly faced by the ECS system. This is another reason for giving way to the formation of the NACH system. The NACH is a superior system that is trusted by a major portion of the population.

Here are 5 major differences why NACH is a better choice over ECS

 

The NPCI introduced NACH as an improvement over the existing Electronic Clearing System (ECS) and consolidated multiple ECS systems running all over the country. The NACH system is used for bulk towards the distribution of subsidies, dividends, interest, salary, pension, etc. and also for bulk transactions towards the collection of payments for telephone, electricity, water, loans, investments in mutual funds, insurance premium, etc.

Benefits of NACH:

E-NACH facilitates everyone who deals in bulk and high volume payments every month or so. From the customers to the banks to the organizations — everyone will be equally benefited through the NACH system.

 

For consumers

  • An automated process of transfer for easier and simpler handling of payments.
  • A faster process that can be settled in a single day.
  • The auto-debit feature allows customers the freedom to not remember the payment dates. This applies for EMI, bills, taxes and other recurring payments that one has to pay at regular intervals.

 

For organizations

  • The online process is fast and independent of cheques and clearing.
  • Requires less time do and send payment like dividends, salaries, bonuses and so on.
  • Make the payment of grants and subsidies easier and quicker for the beneficiaries.
  • Easy settlement of customer bills providing better satisfaction for the customers.

 

For banks

  • Quicker approval of payments helps in creating better customer relations. It also helps maintain corporate clients satisfied with quick services.
  • Less paperwork like cheques reduces the complexity and time required.
  • The online transaction makes it simpler and easier for every party to conduct business easily.
  • Reduces chances of fraud and theft.

Classification of NACH

The 3 major types of NACH are:

  • E-NACH
  • E-NACH through eSign
  • Physical mandates

E-NACH

 

ENACH

NACH Debit ‘e-mandate’ is a process that enables registration of mandates through the Merchant website, thereby making the whole process of mandate registration online. E-mandates through its digital form of creation of mandates via merchant/aggregator websites are authenticated directly by the end customers.

E-NACH through eSign

In this variation, the merchant, aggregator or bank can get a digital mandate authenticated using Aadhaar credentials verified using UIDAI data. The digital mandate contains the eSign of the customer which will be passed on by the Sponsor bank to the Destination bank. The Destination bank can then verify the eSign and accept/reject digital mandates.

Physical mandates

In this case, the customer can submit the physical mandate to their bank branch. The bank after verification of the customer signature and other details provided on the mandate will upload the data mandate through NACH system on the sponsor bank. The mandate image is optional in this case.

NACH Mandate — How It helps Businesses

NACH helps in the online transactions of money across businesses and customers. It also facilitates loan acquisition and repayment. This makes it a widely utilized system in the modern economy. Small businesses, government agencies, corporate agencies, banks, and other financial institutions use NACH to for effective credit flow. NACH also reduces the time taken for such transactions. It is safe and provides tracking of the transactions. This can be done using the reference number produced for every transaction which happens through NACH.

There are 2 main mandates under the NACH that overlook the transaction flow from a client’s account to the collection agency. In such cases, the lender of the loan can collect the EMIs automatically. This is by sending a NACH mandate to the customer’s bank.

NACH Credit

NACH credit is a part of the NACH mandate. Under this section, a business authorized under the RBI guidelines can make huge payments. These are made directly to the bank accounts of multiple beneficiaries. It is an electronic payment service for bulk payment options. It is applicable for large organizations and corporate companies.

The mandate is helpful in the payment of salaries, dividends, implementation of the mandate. You have to specify the following information in the NACH mandate along with your signature. The sample NACH Form is given below.

Features of NACH Credit

  • The system can facilitate 10 million transactions in a single day.
  • Provides safety for uploading documents through web access for approval.
  • In case of a dispute, it provides an online dispute management system for redressal.
  • Multiple file processing is allowed in a single settlement request using the NACH.
  • Corporate organizations can have Direct Corporate Access.
  • Direct Corporate Access to NACH allows corporate organizations to check the status of their transactions effectively.
  • ACK/NACK helps in tracking all your transactions.
  • Operational every day of the week apart from Sundays and days when RTGS does not operate.

NACH Debit

Financial institutions and banks use the NACH Debit to collect payments in large volumes from multiple people without any interference. In case of a loan, the lender uses this system to collect EMIs automatically from your bank account once the customer submits the NACH mandate form. It makes it simple and easier to pay recurring payments like EMIs, bills, taxes automatically and simply. For the organizations, it makes the collection easier and trackable using a single settlement.

Features of NACH Debit

  • Easy collection of recurring payments from bulk customers directly from their bank account safely.
  • Online dispute management system allowing safety and security for high-value transactions.
  • It makes it easier for the agencies and organizations to collect payments on behalf of the customers using a safe system that generates a unique reference number for tracking.
  • It makes it easier for the customers to pay their dues on time without having to remember the date for paying EMI, bills or taxes.

E-Nach Debit Mandate — The Base For EMI

The NACH is used for regular payments. You are not required to issue cheque or transfer funds every time. Instead, you have to issue a one-time mandate for the regular NACH payments.

The NACH mandate form is similar to the normal cheque. But it asks for more information for effective and foolproof implementation of the mandate. You have to specify the following information in the NACH mandate along with your signature. The sample NACH Form is given below.

  • Bank account number
  • Bank name
  • IFSC or MICR
  • Payment Debit type — Fixed or Maximum
  • Frequency
  • Debit type
  • Maximum Amount
  • Period From, to or until cancelled.
  • Signature with name

Debit Type and Period

In the form, you have to select the ‘ Debit Type’. You must decide the ‘Debit type’ carefully. If you are paying the same amount repeatedly, you should use the ‘Fixed Amount’ Debit Type. It ensures that the debit from your account would remain the same in the future.

While you should use the Maximum amount for the Bill payments as billed amount changes. In this case, you set an assumptive maximum amount. The biller would not be able to withdraw more than the specified limit. Fix this amount after the due consideration. The very low limit would create hassles instead of convenience.

Period For Mandate

You have to also decide the beginning and end date of the NACH mandate. The tenure should be fixed for EMI payments. But you can keep it ‘Until canceled’ in the case of Bill payments. If you choose a shorter period, you have to again give the mandate.

E-Mandate of NACH

Normally, people give a mandate for the NACH through the physical slip. But now you can give the E-Mandate as well. This is done through net banking or debit card.

The institutions which give e-Mandate facility, ask for all the information online and takes your consent through net banking. Besides net banking, you can also use a debit card to give the E-mandate. Earlier, Aadhhaar authentication was also used for the Mandate but, the NPCI has stopped it.

You can use the E-mandate, only if the institution has made an arrangement with the bank.

How NACH Debit improves Customer Experience

NACH Credit uses ‘Push’ payment methods which denote payments through credit cards, debit cards, digital wallets and UPI. It is generally required that the customer authorizes each and every payment. As a result, customers often delay, forget or fail to pay, or they just cancel. RBI has relaxed the requirement for second-factor authentication on card-not-present transactions. This allows recurring payments on cards — but customers must have a card. They must also be comfortable with using it. Further, customers must have authorized the instruction via the card network’s security system.

NACH Debit is a ‘pull’ payment method. It requires the customer to only authorize an initial mandate for you to pull money from their account. This is that they don’t need to worry about authorizing future transactions. On the other hand, collectors don’t need to worry about chasing up customers for future payments.

Cards can expire or get canceled, in such case the payment will fail. NACH Debit mandates expire when you want them to. They can’t be lost or stolen. This makes them much more reliable for recurring payments.

Payment gateways levy uncapped percentage fees of up to 3% for card, wallet and UPI payments. NACH Debit charges much less.

Most Indians do not possess credit cards. NACH Debit requires the customer to have a bank account and no credit card is required.

Digital wallet payments require the customer to load the wallet first. This needs the customer’s authorization each time, generating more friction

EMI-based E-NACH Use Cases

 

ENACH

Below we explore some popular areas where recurring payments like EMI’s are easily supported by E-NACH:

eNACH via Debit card or Net banking

With the Supreme Court’s verdict on the use of Aadhaar, most private sector companies could not utilize Aadhaar APIs for user verification. NPCI, after the judgement, deactivated eSign based eNACH product. This led merchants to revert back to paper-based NACH or ECS systems for recurring payments. This was especially in the case of loans and EMIs.

Debit card/Net banking authorized eNACH is meant to be a replacement to the eSign based eNACH. It has a simpler flow and zeroes to minimal human intervention. APIs from NPCI allows a merchant to get the mandate signed using a debit card or Netbanking credentials. They can then send the same directly to NPCI.

NPCI then uses and shares this information with the sponsor bank and destination banks. It then sets up the eNACH payment just within 2 days.

Insurance: If you are subscribing for an insurance plan for your family through an e-Mandate, you can schedule all your premium payments through a simple online process at the start of the insurance period, instead of manually keeping track and making individual premium payments. This applies to all sectors of the insurance industry and is particularly beneficial as regular payments are made throughout the year by the claim owner.

Electronic Appliances; E-Nach also helps when you purchase electronic appliances or consumer goods in the form of EMI-based payments. Today, EMI’s are applicable for devices like mobile phones and tablets as well. If you have bought a few electronic appliances on EMI for 2 years, you can schedule fixed payments through the online process.

Vehicle Loans/EMI’s: If you have purchased your vehicle by taking a loan from a bank or through a financier, then the E-NACH form is provided to you by the banker/financer. If you have picked up a loan for a vehicle, the payment for the loan can be completely automated in this way.

Utility Bills: Most utility bills are paid on a periodic basis. These include Phone bills, electricity bills and others. For example, postpaid bills can be scheduled to be paid automatically. This is by using standing instructions with a credit card.

But, the same thing can’t be done with other utilities. For example, electricity and water bills. This is due to the dynamic nature of bills that are generated on a usage basis every month. As soon as a new bill is generated, you are manually required to pay the amount in full before the due date. Failure to do so risks penalization or no service. With E-NACH, you can schedule recurring payments for the same, hassle-free.

IoT based Smart Services: With recurring payments opening up for debit cards and internet banking via eNACH mandates, India can finally start seeing the IoT industry capitalizing and building products that would mirror IoT innovation in the western hemisphere.

In the future, recurring IoT services like home-security monitoring, smart homes and more would not need you to create your personal infrastructure. In fact, Google and Amazon are already making moves. by introducing their products like the Nest Hub, or Amazon Echo, which are the first step in creating Indian smart homes. Another potential application for E-NACH.

Why Do Customers Choose ENACH?

  • Fundamentally designed for business use (like corporates, banks, and government bodies), NACH provides higher mandate limits up to Rs 1 Cr. for customers.
  • E-NACH mandate creation takes up to 2–10 days as opposed to ECS which used to take 30 days or more.
  • E-NACH eliminates physical movement of mandates, resulting in very low TAT (<2 days)
  • 24*7 capability for mandate registration through corporate web/mobile applications

Conclusion

Recurring Payments powered with eNACH are unlocking a new economy in India. With Debit cards and internet banking being allowed for the first-time to make recurring payments in India. various Industries in India could look forward to building a unique experience for their customers. EMI-based payments are beneficial for both businesses and customers with regards to areas like predictable cash flow, predictable growth, better customer experience and affordable services.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Reach us at: www.signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

KYC’s Impact On Investment Scams, Bank Fraud, And Other Financial Crimes In The US

Posted on | by Signzian

Introduction

With a projected GDP of USD 24.9 trillion by 2023, The United States of America will remain to hold the title of the World’s Largest Economy. This position has always provided lucrative opportunities not just for genuine investors but also for fraudsters and scammers. This is evident from the fact that the majority of all scams in the US revolves around the investment sector.

An Investment Scam is an initiative where fraudsters and scammers convince investors to expend their money in fraudulent opportunities offering high returns and unrealistically low risks.

With the advent of technology, along with the benefits it brings to investing and banking some concerns need to be addressed too. It is far easier for fraudsters to scam individuals and organizations as almost everything is going digital in the sector. Without proper precautionary measures, the boon of technology might turn against the very people whose lives it is trying to make better.

All this renders institutions to hesitate before adopting new technology and its applications. This should change and the careful adoption of technology with secure and safe measures is the right solution. One major measure for this is to obtain and verify crucial data of the entity without letting any red flags go unnoticed. This will help the financial institutions to assess and evaluate if the situation involves any potentially fraudulent activities. Properly implemented KYC achieves this.

Investment Scams and Financial Fraud From The Past Century In The US

No discussion about investment fraud can avoid the name Charles Ponzi, the first man to have nationwide infamy for creating one of the earliest pyramid schemes in the world. The term ‘Ponzi Scheme’ originated from his name.

In the late 1910s, Ponzi promised a 50% return in a mere 45 days time span. The scheme failed causing 5 banks and all investors to lose money and earning Ponzi more than $20 million ( Adjusted to inflation- $220 million). But this was just the dawn of the next generation of financial fraudsters in the country.

Musch closer to the 21st century, Kenneth Lay, the founder of corporate mogul Enron. His ‘strategic’ moves resulted in Enron’s stock price plummeting from $90 to just $1 between 1999 and 2001. The once $68 billion company filed for bankruptcy in the fall of 2001. Neither the banks who had loaned the company money nor the general investors who had invested had any idea of how much they had been hoodwinked until they lost all of it.

Almost every citizen in the US is aware of investment scams in the country. But the problem is that they have neither the required knowledge nor the clarity to protect themselves from the fraudsters. A simple solution is to have strict identification procedures and security measures from banks while onboarding a customer and carrying out transactions.

Apart from these big ones, numerous ‘nuclear’ scammers operate in the country.

Such fraudsters focus on stealing social security numbers by presenting themselves as phony tax officers or stealing the identity of the consumer and misusing it with the bank. Some of them even misuse benefits by forging fake documents to fool the financial institutions. With the advent of the internet by the end of the century, the scams began to go global attracting remote scammers from all over the planet.

 

How is Financial Fraud Faring In The Age Of Information?

In 2014 a Brazilian National under the name Rojo Filho opened more than 17 bank accounts under his real name in the US and used them for illegal money transfer and laundering. The banks included JP Morgan Chase, Citigroup Inc., and Wells Fargo. This was a true mockery of these bank’ policies to know their customers. These policies and systems were supposedly strict after the 2008 financial crash. ‘Supposedly’ being the operative word here. It did not add to the banks’ safety credibility that Mr. Filho had committed multiple financial frauds and investment scams before this.

Mr.Filho was a mere individual who was unsuccessful in the long term. Imagine how many successful scammers are slipping through the cracks.

The fraudsters who target banks and financial institutions are the primary targets for bank security. They impart a direct threat. But what most banks neglect is that even the scammer ripping off of an old man’s IRA or another’s 401(k) can be stopped by proper verification of bank accounts and customer information. The indirect effect this has is immeasurable.

The ease of access to the internet in the 21st century has given tremendous access to scammers. Governments and financial institutions are not blind to this and are taking the necessary precautions to avoid any large scale scamming. This has helped them to subdue singular massive fraud occurrences. But the small scale or as some may call, ‘nuclear’ incidents still take place.

With banks adopting automation more, ACH(Automated Clearing House) scams are also increasing. ACH is a network that functions as a central clearing facility for EFTs( electronic funds transfer) forming an integral part of the national banking system. In the ACH system, payments linger awaiting clearance and to complete the transactions. Using commercial customers’ credentials or even employees’ credentials the scammers manipulate the clearing process and transfer the funds to their desired accounts. If the customer data is well fortified this can be avoided.

A practical way to reduce this is to implement proper verification of customers and businesses. An initial evaluation is necessary, but even annual follow-ups strengthen safety.

Top 5 US States Affected By Financial Fraud and Scams

Though almost all types of investment scams occur in almost every state, we have focused on the state-wise relevant ones here:

  1. Florida

Social Security numbers are the primary targets for scammers here. They pretend to be phony tax collectors representing IRS or other agencies and contact individuals to obtain their financial information. The state also has one of the highest numbers of identity theft cases. The majority of the 40,000 complaints received in 2019 were associated with government benefits and documents.

  • Complaints per 100,000 increased to 997.8 in 2017
  • Total complaints were 208,443 in number

2. Georgia

More than 13,000 cases of identity theft were reported in Georgia in 2019. More than half of this includes government documents and financial benefits frauds. This occurs in a state with a financially dependent youth population with an average student loan debt of $32,283.

  • Complaints per 100,000 increased to 924 in 2017
  • Total complaints were 96,316 in number

3. Nevada

Nevada mostly had a mix of general financial fraud and identity theft cases in 2017 and 2018. A state that was hit hard by the housing crisis, citizens of Nevada are still struggling after a decade of recovery. The near 8% unemployment rate in the state also contributes to an increase in fraud as people are financially pressured.

  • Complaints per 100,000 increased to 770 in 2017
  • Total complaints were 23,071 in number

4. Delaware

New accounts are opened in other people’s names for phone and utilities frauds. This is more than in any other state in the US. Even the surging number of imposter scams contributed to the state becoming the 4th(2017) most affected from 5th most (2015).

  • Complaints per 100,000 increased to 758 in 2017
  • Total complaints were 7,290 in number

5. Michigan

Michigan stands out as of all the major states affected, its citizens had far fewer debts than most of the others. Nonetheless, it was severely affected by the cases of INvestment scams and other financial frauds.

  • Complaints per 100,000 increased to 750 in 2017
  • Total complaints were 74,689 in number

 

What Is KYC And How Does It Help?

In 2003 the Congress implemented the Customer Identification Program (CIP) as a provision of the USA Patriot Act. It prescribes institutions to verify the identities of individuals who conduct financial transactions with them. It is more commonly known as KYC

Know Your Customer (KYC- for individuals) or Know Your Business (KYB- for organizations and institutions) are processes where a firm identifies and verifies the data provided by its clients.

Clients or potential client data is obtained. This includes names, dates of birth, addresses, etc. From individuals and checking Companies House registration, ultimate business owners, annual returns, etc. for companies and businesses. KYC identifies PSCs(Persons of Significant Control), Ultimate Beneficial Owners, and exposed individuals.

Most businesses and financial institutions perform KYC manually using physical ID documents such as the original copy of the passport or driving license. As technology has advanced not only is it more convenient for digital processing but also safer as the options offered by novel fintech security players are well fortified. A Digital KYC process would cross-check all details with multiple data sources from government entities and other bodies to ensure accurate safety.

KYC prevents fraud in multiple ways. Some of them are listed below:

Tracking Tax Evaders
Undoubtedly, track evasion is a type of fraud. The perpetrators defraud the government and thereby the general public of the country. There have been cases in the judiciary where major tax evaders have been tried for grand larceny from the public. To perform this, individuals with high-income use banks to conceal their financial assets. This permits them to evade the high taxes levied on them by the government.

AML(Anti-Money Laundering) and KYC processes prevent such activities. They verify and confirm the identity of the customers as well as the data they provide. Referential data is stored after compulsory document and compliance checks. This will assist authorities in future investigations if there ever arises a need.

Continuous Transactions Monitoring
Regular Transaction Monitoring with compliance checks forms an essential part of KYC processing. Potentially suspicious customers are tracked and reported accordingly. This includes money being transferred for terrorist financing and money laundering. It prevents the flow of black-market funds into the economy preventing any funding for terrorist entities.

Such measures reassure the customers and stabilize trust in the financial system. This will encourage the public to act with integrity and report relevant instances.

Background Checks
Background checks help institutions to evaluate potential customer’s risk classification and status on government watchlists. This provides safety to the organization to be not involved in financial crime, even unintentionally.

Overall Benefits
As an overview, we can say that KYC helps understand the customer’s legitimacy better. All kinds of scams extract customer data and misuse it in another portal. KYC allows prevention at both levels. It makes it hard for scammers to produce legitimacy and double checks the use of data by verifying it with existent credible databases.

For scams ranging from basic identity theft to massive money laundering and terrorist funding, KYC will be a wall hard to pull down. Every single data provided by the customer will be used to verify at each access point. Not only does it fight the problem upfront, it roots it out by making it near impenetrable for scammers to even register as processors or other false pretexts. This renders the investment scammers to oust from their existing methods.

Ultimately KYC reduces investment scams and more significantly develops trust. Adopting strict KYC procedures ensures the customer that the institution is concerned with lawful business practices. This translates into credibility and a good reputation improving the trust in the company.

Conclusion

KYC is no longer an additional measure for banks to take. It is mandatory for safety. But methods of KYC implementation have altered in the US over the decades. The pen and paper approach is no longer viable and what we see are the prerequisites of a coming digitization. As Cyber Crime and Investment Scams evolve to adapt, we must take it with absolute certainty that we stay ahead of the fraudsters.

KYC will prevent scams, especially investment scams as the scammers in this particular arena are not as sophisticated as more developed fields like advanced cybercrime. But we must consider the fact that the scammers will evolve according to the cages they are put in. They are already evolved over our current traditional methods. KYC alone may not safeguard in certain occasions, but without KYC the sector doesn’t stand a chance. It has come to that, digital KYC is the next step in financial security for all institutions, including the traditional ones.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

How Will Unified Data Protection Regulations Affect State, National, And International Banks In The USA?

Posted on | by Signzian

Introduction

Consumers’ personal data is used by companies to sell their products and services, but when this data is personal or private, discretion and safety are essential. In some of the US states, there are personal data regulations that keep an eye on companies processing and using consumers’ data. A good example of this is the California Consumer Privacy Act(CCPA). A relatively new law, CCPA came into effect on June 28, 2018, as part of the California Civil Code. It has been praised as a step in the right direction for data regulations by industry pundits, as it solidly defines how data can be protected and how its misuse will result in dire consequences.

But one of the questions that returned to the spotlight after it’s introduction was, ‘Why isn’t there a federal body like this to regulate data privacy all over the country?’ This is where the US can benefit from a step for Unified Data Protection, a central regulation from the Federal Government that oversees and regulates all handling of consumer data. It will give control to the consumers over their personal data while unifying data privacy laws for all states in the US and simplify regulations for international companies. A Unified Data Protection Regulation will have provisions to process US consumer’s data regardless of the location of the company.

Such a body will force the companies to disclose how the data is processed making the purpose, tenure, and sharing of data transparent to the consumer. The Government will impose heavy fines on companies that violate the regulations making the consent of the consumer irrevocably mandatory. This article focuses on how such a unified regulation would impact the different levels of banking and the types of banks in the US.

What Is The Current System Of Banking In The US And How Does It Handle Data Privacy?

Unlike most countries, banking in the US is regulated at state and federal levels, and depending on the class of the bank it is subject to state or federal regulations. The central banking system which regulates all other banks is called the Federal Reserve and was established in 1913.

Duties of the Federal Reserve include:

  • Conduct the national monetary policy
  • Regulate and supervise banking institutions
  • Sustain the stability of the financial system
  • Financial services to the U.S. government, depository institutions, and foreign official institutions.

Banks in the US are regulated by the Federal Reserve and overseen by the Federal Deposit Insurance Corporation(FDIC) and the Office of the Comptroller of the Currency(OCC). The banks are classified into:

National Banks
It includes all federally chartered banks and has permission to operate in any part of the country. It is not subject to state laws barring a few exceptions. Even though these banks fall under federal jurisdiction, they must comply with state regulations too, if there are any making it a burden for them.

Depending on the type of charter and structural organization, a bank may be subject to many federal and state regulations and is specifically supervised by the OCC. It is important to note that not all national banks possess nationwide operations as some of them have operations in only one city, county, or state. A common misconception is that the Federal Reserve is a national bank, but this is untrue as it is a system of institutions chartered by Congress for financial oversight.

Banks from other countries that have established a presence in the US are called International Banks. Even though they fall under the category of National Banks, It is noteworthy to consider them as a third category for easier understanding. Some of them have exceptions with the national status and a few of them already follow protocols from other countries’ financial regulatory bodies. Many of these banks are European and already follow GDPR regulations even in the US. Sometimes these are not direct implementations.

State banks
State banks are state-chartered and are permitted to operate within the state where they are chartered. They can acquire customers from other states, but they can not open branches in other states unless they acquire the respective state’s charter or a national charter from the federal government. It is also mandatory for them not to have “National” or “Federal” in their names and nomenclature.

 

Is Data Privacy Safe in This System of Banking?

Information security and banking privacy in the US is not protected through a singular law rendering the regulation of privacy sector-based. Thus regulations are different in different states and all states do not possess sufficient research data or machinery for good regulation. This leads to risk and data breaches.

Gramm-Leach-Bliley Act (GLB) regulates the collection, disclosure, and use of personal /non-public information by banks. Federal Trade Commission (FTC) with guidelines from GLB act as the primary protector of banking privacy. It fines violators of state and federal banking privacy laws and these violations are treated as civil offenses in contradiction to other countries where they are usually considered criminal offenses. Nonetheless, there are too many discrepancies and contradictions in these laws that create loopholes and increase risk.

Cyber attacks cost an average of $18.3 million annually per company in 2019 making the total cost $164.6 million. This was through more than 1,473 cyberattacks over the year. The risk is clear from this data and a change for the better is inevitable.

How Has Unified Data Protection Been Implemented In Other Regions?

The most relevant implementation of Unified Data Protection regulation is in the European Union which is the General Data Protection Regulation(GDPR). It sets the guidelines for the collation and processing of personal data, exclusive for consumers from the EU. GDPR instructs companies to give proper data disclosures to their consumers while not compromising any privacy and protection they are entitled to. For example, timely notification of any personal data breach to the consumer is mandatory while making sure this information can not be misused by any third parties.

GDPR succeeded the first Unified Data Protection initiative in Europe, Data Protection Directive 95/46/EC which was created on 24 October 1995. Major banks in the EU encouraged it because it brought more security and credibility for the financial sector. But with advancing technology it became outdated by the late 2000s forcing the EU to consider a new unified data protection framework for 4 years before sanctioning it on 14 April 2016. GDPR came into complete effect on 25 May 2018.

Even though GDPR is for consumers and companies in Europe it affects international entities too. Any company which uses the personal data of a consumer from the EU must follow the regulations which strictly include overseas companies. A bank from the US will have to reframe their process to comply with the regulation. This is important because international US banks already have to comply with data protection regulations rendering them more preferable for consumers.

Notable privileges prescribed for consumers:

Right to Access
Consumers have the right to access their personal data and information. They should be aware of how this personal data is processed and who all will have access to it. Data must be treated as a resource that belongs to its respective owner, the consumer.

Right to Erasure/Be Forgotten
Consumers or customers have the right to request the erasure of personal data. This can be on any one of a number of grounds prescribed. This has certain regulations provided by GDPR, but it still lets the option to be forgotten open to the customer.

Right to Object and Automated Decisions
This allows a consumer to object to processing personal information for non-service related reasons. This includes marketing or sales. Data controllers must allow a consumer the right to stop controllers from processing their data any time they prefer.

Notable guidelines to companies:

Data Controller and Processor
The processing of data has two entities involved- a data controller and a data processor. A data controller is an entity (person, organization, etc. that establishes the why and the how of processing data). A data processor is an entity that performs the data processing overseen by the controller.

Pseudonymization
Pseudonymisation is a needed process for stored data that transforms personal data. The resulting data is not attributed to a subject without the use of additional information. Examples include encryption, tokenization, etc. This renders the consumer data accessible while keeping it partially anonymous.

Notification
The data controller must notify the supervisory authority without delay, especially in cases of discrepancies and malpractices. In Normal functioning, there is an exception if the breach is unlikely to compromise the rights and freedoms of the consumers.

Data Protection Officer
The companies must appoint a data protection officer to oversee the processes.

Penalties to Companies
Penalties will be charged from companies for not sticking to the regulations. a fine up to €10 million or 2% of the annual turnover of the company is issued This may go as high as the authority deems necessary under a set guideline.

How Will Unified Data Protection Affect The Us Banking Sector?

The US is a considerable volatile environment for financial data privacy. 71% of all data breaches in the country are financially motivated which means that almost every 3 in 4 data breaches in the US is in the financial sector. The FBI reported that the amount lost to financial scammers is nearly $1 billion per year and the primary reason for this is the easy access scammers have to private data. Banks do not commercialize and misuse personal data like IT giants, but they do overuse it at times. There have been instances where financial institutions sold consumer data to third parties. Such practices need to be stopped, or at the least regulated.

In 2018 more than 67% of financial institutions reported increased cyber attacks. It was also noted that these cyber attacks are 300 times more likely to hit the banking sector than others. 65% of the top-ranked 100 banks failed web security testing in 2017. This was reported by Carbon Black; Markets Insider, Independent, and IBS Intelligence.

A Unified Data Protection Regulation will bring more clarity to the industry and other regulatory bodies will get defined guidelines and protocols. Banks will have a better understanding of consumer databases while maintaining privacy. Overall, the Unified Data Protection Regulation will have a major impact on the financial sector. Let’s look at how it will affect the three different tiers of the 5,177 banks and savings institutions in the country.

 

How Will It Affect State Chartered Banks?
Relatively, state banks will have to adapt more to the new mechanics. This is especially for banks in states with undefined regulations as they will need additional machinery and manpower. They will also have to dive deeper into automation banking and advanced technology, prima facie making this seem cumbersome. But in the long run, this will help the bank dwell in an advancing industry, and more importantly, this will give the consumer immeasurable authority over her personal data. That is the primary objective of Unified Data Protection.

The overall functioning level of state banks will upgrade with an exceptional increase in the standard of services. This includes more user-friendly online services, on-time notifications, and reduced delays.

Study shows 5,400 banks in the U.S. compete to sustain customer satisfaction. They need to attract new deposits. Local banks must exhibit their advantages in the fields of accessibility, customer service, and financial advice. To an extent, this would level the playing field.

How Will It Affect Federally Chartered Banks (National Banks)?
The capital to be spent on implementation for NationalBanks will be high but in the long term, it will help them establish an international standard in banking. It would make it easier for them to attain international bank status and branching out to Europe will be much easier as they will not have too many regulatory novelties from GDPR.

The biggest relief for National Banks is that they do not have to satisfy multiple regulatory bodies. JPMorgan Chase had reported the extra work going into adjusting data privacy regulation depending on each state. This is reduced with the introduction of a federal system.

How Will It Affect International Banks?
Most International Banks operating in the USA have a considerable presence in Europe and many of them are already following GDPR protocols. A similar system in the US would benefit them. As they have the most number of customers they will contribute the most to changing the financial landscape. International data breaches are most likely to occur and data protection at this level will reduce that risk. Even more dangerous aspects like money laundering and terrorist funding can be limited with such steps.

Banks will be aware of consumer information and will process it with better care as they are not allowed to provide data to third parties. This will give privacy to the consumer while maintaining a keen eye for malpractices. This is essential as the international economy is a sandbox for financial scams and regulations will reduce this.

Banks like HSBC and Deutsche Bank will have a more even battleground while competing with other National banks as they are already under the scrutiny of other international bodies of regulation. With a unified regulatory body, all banks will have to stick to the same rules and compete on the same track. This will benefit the consumer with better options and opportunities.

What Are The Boons And Banes That Follow?

Significant advantages of Unified Data Privacy include:

  • Improved Cybersecurity- It will directly impact data privacy and security improvements encourage banks to develop better security measures reducing risk.
  • Standardization of Data Protection– Its compliance will be assessed by state wise agencies cementing the credibility of each bank as they must stick to the same rule book.
  • Sustainable Reputation- The banks will have a better reputation as a single breach can bring down a financial Goliath. Regulations will render safety not just for the customer, but for the bank too.
  • Enhanced Trust- It will encourage consumers to genuinely share their data with the bank. They are aware of how safe their data will be handled giving them a sense of satisfaction to be in control.
  • Loyal Customers- The trust built fuels the customers’ loyalty making them prefer the services of the banks that provide the best service. Sustained credibility enhances loyalty.

 

Significant concerns may include:

  • Non-Compliance Penalties- Severe penalties are imposed on non-compliant participants because, without strong consequences, compliance will not be effective. Sometimes the magnitude of fines would be overwhelming but this is an avoidable responsibility for the banks. A good example of this is the fines imposed by GDPR for non-compliance. Google was imposed a fine of €50 million for breach of GDPR protocols by the French regulator CNIl.
  • The Cost of Compliance- The capital and machinery required for implementation will be considerable for banks. Especially for small banks. Though long term benefits outweigh this, it is still a concern.
  • Overregulation- If not properly implemented, it will backfire. Overregulation will add more complications to the banking process as too many formalities will tire the consumer and the bank. A delay in time could also occur due to the extra steps added for regulation. All of this is avoided with apt regulatory sanctions. Nonetheless, it is difficult to define them.

Conclusion

There is no doubt in saying that data has become a resource and companies are selling their customer’s data for profit. In such times it is necessary to keep personal data secure. In this perspective, the banking sector to data is what the judiciary is to governance- something that can never be tainted or compromised.

Banks contain a plethora of sensitive information and strict regulation on this is inevitable and precedent. As we are moving towards a global economy, it is only sensible to unify scattered sectors. The innovators in the financial sector should always keep in mind that all the short term discomforts will breed greater benefits for the industry and consumers.

Unified Data Protection regulations will enhance the safety of the consumers’ data. It will build the trust people are losing in companies and their handling of personal data. But furthermore, the significant aspect is that Unified Data Protection is merely the embracing of the coming. We are accelerating our advancements to the future where there is no doubt it holds multitudes of data resources. We are simply trying to protect that future with such strides.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

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