Five ways fintechs can boost UX while complying with regs like 5AMLD blog

Regulation can be annoying for fintechs who don’t want their user journey to have extra steps for the sake of compliance needs. However, it is possible to create smooth UX that suits customers, while also complying with new requirements like 5AMLD.  

Here we tell you what to do to comply, and boost your UX. 

Traditional financial services are comfortable with regulation, and also try to innovate and offer customers new options. That means fintechs have to go beyond, and offer something better. However, if if the UX becomes cumbersome, and starts to feel like an irritation more than an innovation, then they will lose customers.  

The challenge for fintechs is to find affordable solutions to regulatory challenges, that are as smart and quick as the financial technology they offer. 

Customer Experience is King

Customers will take their business elsewhere if their experience doesn’t meet their expectations. Especially in fintech, which is uniquely focussed on UX.

Onboarding has to be easy, and not scare anyone away. And there are big gains for getting it right. 

Research by McKinsey found that every one-point increase in onboarding satisfaction (on the ten-point Net Promoter Score scale) creates a 3% uplift in customer revenue.

For a business onboarding £100 million worth of new customers, this small increase in customer satisfaction could be worth £3 million – and a poor experience could have the opposite effect.

UX is particularly important for millennials, and it was found that 38% of millennials abandoned mobile banking because of long or badly designed processes (Javelin).  

There’s also a reputational cost to getting it wrong, which is essential to new startups that need good reviews. 

Good customer experience is hard enough, but with regulatory extras, you need the right tools.  

Evolving regulations 

Fintechs need to keep up to date with the latest changes in regulation if they want to keep delivering the best customer experience and keep obeying the rules.

The fifth iteration of the Anti-Money Laundering Directive (5AMLD) takes effect from January 2020. It builds on 4AMLD to go further in tackling the financing of terrorism and make financial transactions more transparent.

5AMLD will hit fintechs in three main ways: 

1) Stricter Customer Due Diligence (CDD) checks

2) Beneficial Ownership Registers 

3) New rules around Politically Exposed Persons (PEPs)

It’ll mean sectors that never used to be affected by AMLD now will be.

Prepaid cards, mobile wallets, payment service providers with customers who make remote payments over €50, states outside the EU, firms handling cryptocurrencies, estate agents, free ports and art dealers, will all now face new or stricter CDD checks.

Also, companies will have to perform frequent, strict CDD and Know Your Customer (KYC) checks on beneficial owners of corporate and other legal entities.

Finally, EU member states will have to compile lists of PEPs. The lists won’t name individuals, but enhanced CDD checks will be triggered when there’s a match against a job function in the registers.

AML regulations can introduce friction, but high quality data and agile analytics are key to balancing customer experience with regulation requirements. 

The Revised Payment Services Directive (PSD2) now facilitates Open Banking, which is a huge opportunity for fintechs.

Permitting third parties to make peer-to-peer transactions using open APIs has now introduced new regulatory requirements in the form of Strong Customer Authentication (SCA).

The implementation of SCA is a delicate situation, as fintechs do not want to add friction to their UX.

GDPR, which fintechs will be more than familiar with already, means firms need to get consent for the data they collect and how they use it. 

Everyone’s been forced to consider how best to comply in a way that doesn’t interfere with customer experience.

Five ways fintechs can boost their UX 

  1. Look for new technologies that’ll help you meet your regulatory requirements. 
  2. Be sure to account for international variations if you operate across borders. Consider differences in documents from country to country and the differing regulatory requirements in each territory.
  3. Use technology to keep your UI as simple as possible. Users won’t tolerate spending too long verifying their identity just to use your service.
  4. Motivate customers with visual and contextual feedback to guide them through the onboarding process. 
  5. Test your products to make sure they’re as easy and enjoyable to use as you’ve designed them to be. Do as much testing as you can to prove your UX works.

How Hello Soda can help

We have cost-effective solutions for all regulatory needs, with Profile iD, iDocufy, BioMatch, and UtilityConnect, it’s possible to verify customers in seconds, verify ID documents, and be sure of address. We also offer AML solutions such as PEPs & Sanctions checks, essential for 5AMLD.

We have helped global clients to improve onboarding UX, with increased uplift rates of 68%, and reduction of fraud by 21%. 

Our tools are automated, easy to integrate, and available through one API. And they are used in 177 countries worldwide, due to the seamless UX and utility that they offer to thousands of customers. 

So if you want to comply with regulations in a way that will boost rather than burden your UX, then please get in touch here to find out how we can help.

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