Digital Compliance Sends Money Transfers Speeding

For cross-border providers, offering customers the speed they crave often makes for a complicated mission.

After all, whether money is being sent to an individual or a business, expediting the process isn’t just about handling customers or payments more efficiently. It also requires finding faster ways to securely address customer identification program (CIP) obligations and know your customer (KYC) requirements.

U.K.-based online cross-border remittance services provider WorldRemit is one player working to smooth out common speed bumps that slow payments for businesses and individuals alike. In a recent interview, Brion Nazzaro, the company’s U.S. and group compliance director, explained to PYMNTS how online tools can make remote identity verification even more robust than in-person processes — and also help kick cross-border payments into higher gear.

Taking Transfers Online

WorldRemit is focused on P2P, and its experience has implications for B2B operations, Nazzaro said. The company currently enables consumers to send money from more than 50 countries and receive it in more than 140.

Behind its faster payments strategy is an online-only approach. That consumers want to handle money transmissions in cash is a myth, according to Nazzaro. To keep up in a fast-paced, digital world, WorldRemit emphasizes electronic alternatives that cut the time it takes to trek to brick-and-mortar agent locations.

“Is it really reasonable to say, ‘Yes, your transaction can be done within 15 minutes of getting to an agent,’ but getting to an agent might be another 15 minutes, [and] getting the cash to the agent might also take you time?” Nazzaro asked.

Instead, the company uses credit and debit cards, bank transmission and mobile wallets like Apple Pay or Android Pay to fund transfers. For recipients, providing electronic funds both saves travel time and removes the risk associated with collecting large sums of cash. Providing cash is often an unnecessary friction, Nazzaro said, particularly given that many recipients will spend it digitally anyway.

“[Received money] has to be usable, not just accessible,” he explained. “Cash means you have to be physically present and, across the world, a lot of the things people want to do with the funds they are receiving do not require physical presence.”

Response has been positive in the P2P space. Nazzaro noted that two-thirds of WorldRemit’s U.S. payments go out as non-cash receivables, and the company also handles 74 percent of all cross-border transactions made using electronic wallet service Mobile Money.

“Right now, 5 percent of the money transmission market is digital,” Nazzaro said. “[But] we’re projecting by 2021, it’ll take up the majority of the market.”

Digitizing Identity Verification

Along with digitally handling money transfers, WorldRemit and others like it also need to be able to meet KYC and other compliance checks in an increasingly digital realm.

This is especially critical for companies serving B2B transactions, where identity verification can be more complicated. While WorldRemit is currently focused on delivering P2P transfers, Nazzaro foresees the same technology eventually being used to help businesses exchange payments across borders – especially for payroll distribution and vendor services.

But entering the B2B realm is bound to present new hurdles. When conducting P2P transfers, a company must determine if a person is who he claims to be. In the case of B2B transfers, however, the company must also determine if that person is a valid representative of the business and authorized to make payments on its behalf.

“It’s really important to know whether that person has the right to say that this payment should be paid,” Nazzaro said. He added that the company’s decision to operate digitally makes these kinds of checks easier and more robust.

An on-site P2P interaction delivers limited information because it lacks some of the extra aids available in the online realm – including the capability to check to see whether a return customer is accessing the transfer service using the same, previously used device. More follow-up questions are needed if the device has changed, and the company is also able to draw up and analyze online records on a customer, conduct electronic document validation and complete ID and photo scan comparisons.

“We can conduct our CIP, our KYC – all of our compliance checks – through electronic means, and serve you from wherever is convenient for you, through many methods that can be 24/7,” Nazzaro said.

Staying Compliant in Different Countries

Having those compliance checks in place is crucial for a cross-border operation. Regulatory compliance is a central issue for these companies and, in Nazzaro’s view, the faster, better way to remain in regulators’ good graces is to play nice. That means meeting the compliance obligations of sender and recipient markets down to the letter, as global regulators will pay close attention to overseas money sources that could influence local economies.

“Cross-border transactions are a national security priority,” he explained. “You do not want a foreign entity being able to affect your economy in significant swings.”

Nonetheless, the rise of FinTechs is creating a strain, Nazzaro added. Many use their FinTech status to argue they are not officially financial institutions (FIs), and thus should not be treated as such by regulators. Being a disruptor should not be about disrupting regulation, though, he said. Instead, companies should be open and transparent to improve local market regulation compliance.

In the end, Nazzaro is hopeful WorldRemit’s model will prompt a broader discussion on how to improve and accelerate international B2B transactions. That means examining how to bring over and apply technology that’s found success in the P2P realm. If all goes well, the future of cross-border B2B payments could be faster, better, safer and stronger.