Since the dawn of the Internet, we have seen an exponential growth in the phenomenon of globalization. The World Wide Web allowed us to connect, communicate, and do business with other nations across the globe in ways like never before. And of course where there is business, you’ll also find money – which makes the world go ‘round, but what makes the money go ‘round?
Despite recent advancements in financial technology, the majority of today’s global payment infrastructure still dates back to before the Internet was a thing. Accepting international payments through traditional means usually entails outrageous fees and time spent waiting on long processes that can take up to five days — if everything goes smoothly.
Believe it or not, there’s still hope. Fintechs are continuously pushing the envelope for payments to improve the customer experience and the accompanying costs. One local startup, Transactive Group, is helping businesses accelerate their business process with instant transaction processing. Customers are provided with Virtual Bank Accounts (VBAs), which allow companies to accept payments directly with no international wire fees or delays even if your office is physically located elsewhere.
This month, we chatted with Transactive Group’s Chief Risk Officer, Miles Kelly, to learn more about the industry’s current pain points, payment fraud, and predictions for the upcoming year.
Trulioo: What are the two biggest pain points Transactive is trying to solve? How do you differ from other payment providers?
Miles: First, companies of all sizes, SMEs and Corporates alike are held back by reliance on antiquated payment systems that make it difficult to quickly and affordably send payments to beneficiaries whether home or abroad. Transactive makes it easy and affordable for businesses to send instant payouts, to pay invoices, payroll, refunds, or rebates, within seconds to beneficiaries in Europe and the UK without having to set up new bank accounts or create new corporate infrastructure.
Second, there are thousands of talented developers out there creating new tech platforms to alleviate problems associated with, not only payment, but tracking, reporting and analyzing data for SMEs and Corporates in specific sectors as well. They typically have great insight into their target sectors, and know exactly what their end-users require, what it should look like, and how it should be delivered; however, the overhead associated obtaining the required licenses with the appropriate regulators, developing bank relationships, learning all about payment risk and fraud, and ensuring compliance to anti-money laundering and KYC regulations is more than most tech platform developers can handle. This has long been an obstacle to providing secure, streamlined, purpose-built payment solutions that meet specific business needs.
Transactive wants this to change, so we provide a secure and fully regulated instant banking service backbone to developers who want to include the ability to send instant payments, receive payments, or store payment within their platform functionality. The API is free and readily testable within a sandbox environment by anyone that wants to solve payment problems for themselves or others. Whomever uses the API to set up accounts and send or receive payments needs apply and sign an agreement with Transactive – easy to do at the platform level, or at the business user level - and pays for only the transactions they send or receive at a rate that is fair and competitive with the banks.
Trulioo: One of the greatest concerns within the payment space right now is fraud. What kind of systems or processes does Transactive have in place to ensure its transactions are protected from fraud?
Miles: As a firm focusing on B2B/B2C payments, Transactive must ensure that companies are who they say they are and their businesses and sources of revenue are legitimate and not the result of financial crime, including fraud or deceptive marketing. We must know what the company does, and that the company’s authorized user truly represents the company and has permission to act on their behalf. Our compliance systems are not only dedicated to investigating the business background, but also the individual authorized to act for the company.
We use a combination of manual checks and automated verification services such as Trulioo’s Global Business Verification, Electronic Identity Verification and ID Document Verification to look at the company and to confirm the identity of the individual.
During the course of the relationship we have to ensure against account takeover, or the account being hacked, which would allow potential criminals to use the account for their own purposes or to steal funds from our client.
We use strong user authentication such as Twilio/Authy to ensure the company authorisations stay valid and that unauthorized persons cannot take over the account.
Trulioo: With the year wrapping up, what are three predictions you have for 2018 with regards to fintech and new regulations around the world?
Miles: We are very excited by developments in real-time capability in payment systems and this something that will be a fundamental theme for 2018, in Europe, North America and Australia.
The Second Payment Services Directive (PSD2), which will come into force in January 2018, will require banks to open their interfaces to new payment applications – it means there is a big opportunity for fintech companies to partner with banks to provide better customer experiences and greater transparency on service, performance and fees, and improve consumer choice. There is now a race for banks to replace legacy systems and move to more accessible and flexible systems as regulators open up exchange clearing and settlement to direct access from non-banks.
While PSD2 will mostly impact Europe, both Canada and the USA will make significant moves in the same direction. Canada has an ongoing plan to modernize its payments ecosystem and move to more transparent, and faster electronic payments. After some years of consultation and developing requirements, there should be considerable moves in 2018 to set down the next steps and the plans for implementation particularly in real-time payments.
I expect to see more systems based on shared risk, trust and distributed ledgers. Many issues such as fraud, verification of identity and account ownership, and clearing of multi-party transactions can be met and solved through distributed databases, which collect data from multiple locations and provide an audit chain.
If there’s a fintech company you’d like to see featured in our Fintechs in Vancouver blog series, please submit your request to firstname.lastname@example.org.
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