FinTech, Big Data, and AML Compliance for MSBs

October 11, 2017

Big Data and FinTech are giving the money service business industry more tools than ever before to serve their customers while shoring up their compliance risk. MSB regulation now spans the globe and financial institutions across the world juggle regulations that vary from jurisdiction to jurisdiction. Varying regulation, massive amounts of data, and a lack of communication create an environment of confusion and reaction. Harnessing big data and FinTech to gather, organize and analyze data empowers the MSB industry to stay in control when it comes to compliance.
Efficiently using technology to identify issues and communicate these issues will streamline compliance programs and bring a new level of transparency to MSB operations. Know Your Customer (KYC) requires MSBs to gather data and now the industry has even more incentive than ever before to put this data to work.

Rise of Big Data

Big Data is defined as “extremely large data sets that may be analyzed computationally to reveal patterns, trends, and associations, especially relating to human behavior and interactions.” We take part in (and our actions become) Big Data every single day. You create data with every swipe of your card at the grocery store, every second spent on your smartphone, and through every banking transaction. Every digital touchpoint generates more data. And this data is used by companies to improve the user experience, gain insight into consumer behavior, and inform major decisions.
Banks and MSBs are using Big Data to boost security, increase compliance, cultivate customer loyalty, create personalized offerings to individualize experiences, reach new customers, and retain existing customers. The financial world as we know it today is driven by Big Data. Many people now consider banks technology companies. Think about it. Your bank uses technology to create your entire experience.
Online banking, automated ATMs, and mobile apps are the cornerstone of the modern banking relationship. At every point, data is collected. This data becomes a part of Big Data and is used to make additional business decisions regarding your banking experience. Every ATM location, mobile app update, and online banking service is carefully crafted using Big Data. In the financial services and MSB industries, Big Data is considered the future of compliance and fraud prevention.

FinTech Revolution

FinTech has been around since the dawn of the financial services industry. FinTech refers to anywhere technology is applied to financial services. This includes helping businesses manage financial tasks through software, applications, processes, and business models. In the world of money service businesses and banks, FinTech is often applied to help financial institutions manage customer interactions, facilitate payments, and improve compliance. Since the 2009 economic downturn, FinTech has become more disruptive. Startups and tech companies are vying for the attention of consumers and businesses alike.
FinTech is also emerging as a compliance powerhouse in the wake of the Great Recession, which marked a boom in financial regulation. FinTech was originally considered more a back-end data-management system.  Peer-to-peer payment platforms have put FinTech in the spotlight as an end-to-end system. No matter the use, FinTech continues to reshape and evolve alongside the financial services industry. E-commerce, global payments, and even cryptocurrencies are examples of the disruptive power of FinTech.

FinTech, Data, and AML Regulation

Big Data and FinTech are the key for effective compliance and risk prevention. Anti-Money Laundering (AML) regulation is similar to FinTech in that it’s been around for a while. After the 9/11 terrorist attacks in 2001, the USA PATRIOT Act amended previous AML requirements set forth by the Bank Secrecy Act of 1970. The revise requirements were designed to encourage cooperation and communication between financial institutions, law enforcement agencies, and regulators.
In order to fight financial crimes like terrorist financing, clear and constant communication is key. Compliance experts rely on data to identify and halt illicit activity. With the amount of data generated by every transaction, the databases are unwieldy. FinTech allows us to efficiently process Big Data while eliminating human errors. The result? MSBs and banks are able to stay ahead of the criminals.
Outside of the MSB industry, financial institutions and lenders are using data to spot red flags. For example, online lenders are checking the IP addresses of loan applicants. If the applicant states that their home address is in New York, but their IP address is in South America, the application is flagged. When FinTech and Big Data work together, they can help humans catch inconsistencies and anomalies before they become full blown financial fraud.
As FinTech continues to grow, the focus is now on collaboration over competition. There is room for startups to work alongside established players to improve the financial services industry. For MSBs, the applications of FinTech and Big Data will continue to grow.

Innovations for Money Service Businesses

Money Service Businesses are currently benefiting from additional innovations. POS technology enables MSBs to capture all of the necessary data points for every check cashing transaction. This data is then checked against a database, recorded, and, if necessary, reported. Beyond the individual transaction, MSBs also enjoy improved cash logistics.
NCC just launched nationwide cash logistics serving all locations in the United States accessible by the USPS. The service is made possible through NCC’s partnership with TransGuardian and Rapid Armour. Any MSB location in the US can send and receive funds via the USPS. This means that MSBs can rotate their working capital, sending cash for deposit to their financial institution or receiving cash from deposits at their MSB location.
NCC’s team of MSB and compliance experts stays on top of all financial trends and pending regulatory changes. NC sets up all of their clients with cutting edge technology so that they can take advantage of FinTech and Big Data to safeguard their business against fraud. Improved data brings improved compliance and governance to all of your MSB locations. In the case of an audit, organized data collection protects your business.
If you are ready to enjoy your own MSB bank account and supported MSB services, reach out to NCC via phone or online form from right here on the website.

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