Fintehch – the combination of finance and technology – has revolutionized the financial world. With the advancement of technology, the fintech companies are introducing new products and services with faster payments, Robo-saving products, crowdfunding to consumers. The evolution of the Fintech market has clearly made an impact on the market, eventually breaking the dominance of traditional financial services players.
Digitizing the financial operations has no doubt improved customer experience, but on the other hand, it has induced the risk of digital fraud and scams. The exchange of data over the internet is grabbing the attention of the cybercriminals and fraudsters out there. Over the past few years, the fraud scandals involving crowdfunding and peer-to-peer platforms drive attention towards the risk of using fintech. The chances of risks are greater because of the absence of proper regulatory and compliance processes. In order to survive the fraud-strike, the fintech industry needs to be protected against fraudulent activities.
The business owners and entrepreneurs have successfully identified another opportunity to protect the fintech industry and are quite active in developing the new industry for the convenience, known as RegTech.
Regtech – an essential part of Fintech:
Regtech is the blend of two terms, i.e. regulations and technology. It refers to the technology that works alongside Fintech and traditional banking services. The purpose of Regtech is to make the services more efficient by ensuring the legal and regulatory obligations on the industry and allowing innovation at the same time in the regulated industry. Regtech is a rapidly growing industry that has become an inherent part of Fintech to make it a fraud-free industry with extensive support for customer experience.
Biometric Technology and Tokenization
Regtech is making a huge revolution in the industry to fight and reduce the risks of fraud. Biometric technology and tokenization are the most popular evolutions of Regtech that are immensely used now in the context of online and mobile payments. Biometric verification, with the introduction of artificial intelligence and machine learning, isn’t limited to fingerprints. Instead, it has reached the new heights of verification and authentication through facial recognition, retina scanning and voice recognition, etc.
However, in the case of tokenization, a unique “token” is generated against each transaction that stores the complete information and keeps the sensitive data encrypted. The encrypted data includes personally identifiable information like a customer’s name, card number, phone number, etc. Even if the intruders get hold of the token, they won’t be able to steal customers’ data because of tight encryption.
The trend of online payments has raised money laundering and terrorist funding activities. Due to different sharing platforms, it is quite difficult to know the information of the participants. Harmonization of payment gateways can allow faster, efficient and more effective identification of the transaction that might be illegal. KYC verification and AML screening are the best way to secure the fintech industry by verifying the identities of the consumers. Moreover, digital verification checks help the organizations to comply with the regulatory KYC and AML obligations.