A Swiss Financial Market Supervisory Authority, FINMA, has issued a newsletter to its bank members outlining the digital verification framework for new members, as a way to improve onboarding (business relationships via digital channels) efficiency. The deadline for collecting comments on the proposed framework is January 18, 2016. This has come at a time when mobile and online based businesses are incorporating the use of webcams and smartphone cameras in verifying customer identification, which also includes passports and driver’s licenses.
Fintech companies, some of which include Jumio and AU10TIX, that provide automated solutions are set to benefit from the high demand for quick verification products. Under FINMA’s jurisdiction, OneVisage, a fintech startup based in Switzerland, has developed a solution that allows authentication of payments via smartphone selfies. This kind of technology is now becoming an accepted trend among e-commerce sites and online financial companies. Therefore creating this type of regulatory framework in the industry can be seen as a form of natural progression for financial regulators.
According to the proposed rules, certified identification will no longer be needed for FINMA regulated corporations. Currently verification is done through in-person identification at the financial company’s designated business place, and by submitting handwritten signatures to the companies. But with the new rules, authentication will be done by taking and verifying digital copies of identification documents via technology. Additionally, real-time video conferencing will replace in-person visits.
Dukascopy Bank’s CEO concerns
The onboarding efficiency is expected to improve with the new framework, but FINMA regulated firms will also have to bear the associated technological burden. This has made Dr. Andre Duka, Co-CEO/CTO of Dukascopy Bank, to share his opinion in the newsletter.
Duka started by commending FINMA for their initiative saying that it was positive and long-awaited in the sector. However, he criticized two specific elements of the framework.
First, he noted that the framework only allows non-certified document copies to be verified if the first money transfer is being made from a Swiss bank. This means that foreign customers transferring funds from non-Swiss accounts still need to go through the extensive and time-consuming onboarding process.
Secondly, he stated his concerns about the extra technology requirements that FINMA regulated firms will face in order to comply with the new rules. This will be counterproductive since the firms already have compliance teams conducting verification of customer documents.
Another issue subject to discussion is whether integrating technology in verifying documents will cause overlap and inefficiencies in the new technology solutions staffs, rather than create efficient transactions.
On the other hand, it has been recognised that there are some benefits of verifying documents automatically rather than manually, which include reduced abandonment rates during the process of opening an account, augmented fraud prevention, reduced back office costs, etc. In addition, regulators responsible for controlling verification technology should apply certain technological standards that should be met by all verification solutions.
Dukascopy Bank’s CFO-CTO, Laurent Bellieres, said that the initiative by FINMA is more than mere technological integration, and differs with the number of firms operating in the country. According to him, FINMA aims at making “technical means” mandatory for all financial firms, which may not be efficient for some services, such as the typical account opening. He also said that the needs of foreign customers may not be fully provided by technical solutions, making it inefficient for firms with a global customer base. Bellieres said that all these factors increase the complexity of doing business and aggravate Swiss competitiveness, with no substantial benefits to show for it.