2 Ways Card Issuers Can Improve Their KYC Workflow
This article discusses how card issuers can benefit from utilizing a KYC workflow management platform. It also touches KYC as a service and different approaches to it.
Prepaid card industry is on the rise
Prepaid cards are on the rise, while cash transactions in many parts of the world are close to “extinction”. According to the UK Payment Markets Summary, the number of cash transactions dropped from being more than 20 billion in 2007 to less than 10 billion in 2020. At the same time, debit card payments rose from 5 billion to almost 20 billion annual transactions.
Thanks to the rising trend of cashless payment methods, neobanks, FinTechs, and other program managers, who offer debit cards, emerge.
Prepaid cards are convenient, accessible, and flexible. They also have become a partial substitute to traditional banks. Because of that, the prepaid cards industry is becoming increasingly widespread. According to the Allied Market Research prepaid card market is expected to reach $5,510 billion by 2027.
The biggest markets for the prepaid cards are Europe and Asia Pacific regions, while the USA is also experiencing accelerated growth in the popularity of the prepaid cards.
Particularly common are open-loop cards, which can be reused many times as managing finances on such cards is very simple. While open-loop prepaid cards can be used almost everywhere, single-purpose or closed-loop cards can only be used at certain stores and chains, and they cannot be topped up. The most common example of a closed-loop card is a gift card.
Regulations and security of prepaid cards
Due to the accessibility of the prepaid cards, they quickly became a favorite tool for criminals to either perform Money Laundering or pay for the goods on the black market.
In order to prevent Money Laundering, Terrorist Financing, and other types of crime, global regulators are constantly updating rules regarding prepaid cards.
In Europe, 5AMLD lowered the threshold of performing the KYC to 150 EUR for offline purchases and 50 EUR for online purchases. Similar adjustments have been introduced in Asia by the Hong Kong Monetary Authority (HKMA), titled as Guideline on Anti-Money Laundering and Counter Financing of Terrorism, and soon to be released in Singapore as amendments to the Payment Systems (Oversight) Act (PSOA).
All of these regulations make KYC a necessity for every program manager. The questions are, however, the following:
- How can card issuers help program managers with KYC?
- How do card issuers benefit from having a KYC workflow management platform?
Let’s start with the first one.
How can card issuers help program managers with KYC?
Most of the card issuers strive to be the one-stop-shop for all of the services related to prepaid cards. Usually, card issuers also offer ledgers, IBANs, BINs, managing transactions, and, of course, issuing both physical and virtual cards.
What sounds like a simple task of getting a card sent to an end-user requires a lot of additional services:
- Initial software setup
- Possible white labeling
- Plastic card orders
- Accessing funds
- Loading money to the card
- Maintenance and support
Card issuers have managed to simplify all of this for program managers and make sure that getting prepaid cards for any business is stress-free, and integration is seamless.
Card issuers also have to monitor and keep all of the information about hundreds of program managers and millions of cardholders up to date.
There’s one thing, however, that all of the FinTechs need, but many of the card issuers fail to provide – a proper KYC software solution, which is built compliant with the AML compliance program. Because of that, program managers seek 3rd party KYC service providers.
In case program managers fail to provide proper risk management, and some sort of fraud takes place using prepaid cards, card issuers are also responsible for it.
Adding an opportunity to become an ultimate one-stop-shop for all of the banking needs is essential as customers seek simplicity and would prefer KYC provided by their card issuer. Implementing ID verification software alongside the ongoing monitoring will ease your customers’ lives a hundredfold.
The benefits of program managers seem crucial. Let’s take a look at the second question.
How do card issuers benefit from having a KYC workflow management platform?
Let’s first understand what a KYC workflow management platform is.
BASIS ID has created a unique platform that allows you to track the data of all of the program managers as well as cardholders in one simple to use dashboard. It’s not just an identity verification software or a messy database. It’s a powerful tool, which has everything from identity checks to management of program managers.
The KYC and AML Software performs identity analysis, has advanced machine learning algorithms, and intuitive software for the Compliance Officers to use. It also utilizes data from Dow Jones, Experian, and other providers to screen users against tens of thousands of databases.
Most importantly, however, it makes life easy for card issuers. The platform continually updates all of the data, makes sure to renew documents when they expire and has automatic reporting tools. The KYC workflow management platform allows card issuers to report to Visa & Mastercard, banks, auditors, or other data authorities.
Let’s take a closer look at the two ways, how card issuers can benefit from the KYC workflow management platform.
1. Managing program managers and end-users
The first option will work for you if you want to control card managers and end-users and nothing more.
You will have an stunning dashboard, which will act as an omnichannel data processor and storage. It will also keep all of the data up-to-date between all stakeholders and automatically acquire updated pieces of information. It will also keep the history of all of the changes and updates.
The dashboard will display everything: how a client was checked, their risk score based on custom programs chosen by the program manager, the whole history of a user, and all of the data that belongs to them. The dashboard will also allow you to generate and send reports to the necessary authorities quickly.
This approach is impressive. However, there’s a second one.
2. Offering KYC and earning income at each step
As we have discussed earlier, program managers want to have a one-stop-shop for everything related to banking. Plus, they trust their card issuers and prefer to implement identity verification software and the AML service providers offered by the card issuers, as it ensures quick integration and compliance check.
What are the benefits of this approach?
- Card issuers earn additional income
by reselling the ID verification software and KYC management workflow platform. Card issuers determine their prices and business models, which allows them to make money at every step or verification.
If a crime takes place using the prepaid cards, card issuers can also face serious legal consequences. Besides, cases of fraud are negatively reflected in the reputation of card issuers. By offering a trusted KYC service provider, card issuers can be sure that regulations are followed and that they can easily report to the Bank, Visa & Mastercard, and other authorities.
- Managing Program Managers using a convenient dashboard.
The KYC workflow management platform is a single entry point for Risk and Compliance Managers to view and update the information about the end-users and program managers. All of this can also happen in different regulatory environments.
How does it work?
To put it simply, the card issuer will have a powerful dashboard to manage both card managers as well as end-users, while earning money by reselling the KYC services.
Card issuers that already offer KYC
Unlike other KYC software solutions, the KYC workflow management platform allows you to manage loads of data.
If you are already using a KYC service provider, you can quickly transfer all of the users to the platform, and BASIS ID will monitor them and make necessary updates to their data. For example, tracking document expiry dates and performing ongoing screenings against blacklists and adverse media.
The platform can merge the data from all of the cardholders into the dashboard, where you can choose between your program managers and make necessary reports.
Which way to go?
In this article, we have determined that offering KYC as a service to program managers by a card issuer benefits both parties. However, the question remains, which approach to choose.
We believe the answer is obvious. The second approach allows a card issuer to monitor all of the program managers and make required reports, as well as be sure that card managers’ KYC providers are trusted. It also makes sure that the processes are compliant with regulations. But most importantly, card issuers have an opportunity to earn additional money from every verification.
Please, reach out to us, and we will be happy to determine, which approach works for you. BASIS ID will be glad to create a custom solution for your needs.
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