In a new white paper, transaction security specialists Ondato explain why the rapid development of Open Banking across Europe means banks, merchants and PSPs must turn to smarter, joined-up KYC and AML techniques for success.
With hundreds of products and millions of users just a few years after it was launched, growth rates in Open Banking mean the banking and payments landscape is being transformed.
In the white paper, Ondato argue most banks and merchants are not ready for this new landscape from a security perspective, relying too heavily on outdated Know-Your-Customer (KYC) and Anti-Money Laundering (AML) systems which are disconnected from other parts of their business.
Open Banking: exponential growth, exceptional potential
Launched across Europe in 2018 as part of the EU’s second payments directive (PSD2), Open Banking makes it easier for merchants and financial institutions to offer products from other providers through their websites and mobile apps, as well as facilitating instant payments, request-to-pay arrangements (R2P) and other services.
“UK consumer use of Open Banking is growing at 20% a month. More than half of UK banks plan Open Banking products by January 2023.”
In mid-February this year, the UK’s Open Banking Implementation Entity (OBIE) announced that more than 5 million UK consumers were now using open banking products, up 1 million since November 2021.
OBIE data also revealed that Open Banking payments were rising 20% per month, and 55% of UK banks plan to offer an Open Banking (OB) solution by the end of 2022.
Having established standard API architectures, banks in Germany and France are also rolling out OB products in partnership with Third Party Providers (TPPs).
In Open Banking and instant payments need smarter KYC, Ondato explain how the convenience and choice of Open Banking will be accompanied by a requirement for first-rate Know Your Customer solutions.
Open Banking services often involve integrating third-party solutions or moving between different providers’ platforms – something that makes fast, accurate and effective KYC a must.
“Too many banks and merchants are not ready for Open Banking, relying on outdated, disconnected KYC and AML systems.”
Ondato offers a full set of tools that employ powerful AI and cover the spectrum of compliance challenges, from new client onboarding to a comprehensive database for ongoing client monitoring.
“Fully digital onboarding, verification and authentication solutions powered by effective AI are the only way to ensure the continued effective operation of your business while keeping user friction to a minimum and meeting or exceeding growing regulatory demands”, says Liudas Kanapienis, CEO and founder at Ondato.
“Using a range of unconnected KYC and AML will not solve the problem: separate systems do not communicate with each other, leading to information gaps and more human intervention and cost.”
Ondato’s wide-ranging suite of connected KYC and AML solutions, from customer onboarding to customer lifecycle management, was created to prevent this from happening.
With Ondato, KYC compliance becomes a driver of new revenue growth, rather than a drain on resources.
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