Shams Syed is CEO of AptPay, Inc.
In the past, sending money through wires or ACH transfers could take days. Today, with the help of fintech companies, online money transfers happen almost instantaneously. While real-time money transfers bring many benefits to consumers, they also pose significant challenges for regulators on the lookout for criminal activity.
As the CEO of an international financial services company, I see how regulatory technology has struggled to keep up with the rapid advancements of financial technology, creating loopholes for bad actors. Here are two places we should focus our efforts in the near future.
Bridging The Gap Between Speed And Security
In the fast-paced financial world, it can be difficult to verify the authenticity of bank account details and customers’ identities in real-time. This opens up risks like money being moved quickly between accounts, which can be exploited for illegal activities such as money laundering. The rise of money laundering in sectors like online gaming, which has grown exponentially in recent years, has been linked to funding for terrorism.
The problem is that quick and seamless payment systems have outpaced regulatory measures. If we want to keep the speed and convenience of modern transactions while ensuring they are secure and compliant with regulations, we have to integrate fintech and regtech so they develop hand-in-hand.
Ideally, financial companies need to incorporate regulatory aspects into their offerings from the start, instead of treating them as secondary considerations. For example, when a customer is onboarded and a transaction is made, regulatory checks should happen simultaneously, not after a delay.
Fintech companies will have to work closely with regtech firms to make this happen, but I believe it is entirely possible. By integrating these two areas, financial services can offer seamless, instant transactions that are also secure and compliant with regulations, ensuring they are both efficient and responsible
Embracing Advanced Technologies
Financial institutions need to be proactive in monitoring transactions and customers, and adapting to new threats as they emerge instead of playing catch-up. A customer might pass initial checks but could later engage in illicit activities with no warning. Constant monitoring and surveillance are essential to track customers’ behavior, making it less likely that bad actors always remain one step ahead.
Technological advancements in fintech are starting to help create a more secure financial ecosystem, where movements of funds are transparent and bad actors are more easily identified and stopped. AI and machine learning are poised to become even more crucial in helping to understand consumer behavior and patterns.
Some organizations are already starting to experiment with blockchain-based tokens linked to specific individuals. These tokens would monitor a person’s financial activities across various platforms, instead of simply following the movement of funds. This is important because a customer’s behavior can vary from website to website. Financial institutions can then create individual risk-based assessments.
The financial ecosystem is changing incredibly quickly, and fintech companies need to stay abreast. Too often we think our only job is to make sure the money moves, and that banks and regulators should be left to deal with everything else. But instead we need to wear both hats and ask ourselves how we can safeguard the ecosystem even as we build and improve our offerings. It won’t happen tomorrow, but I’m optimistic that eventually we’ll be able to solve for both problems at once.
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