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FinTech Connect x Onfido

Named as one of Forbes 30 under 30 this year, Husayn Kassai is the award-winning co-founder and CEO of Onfido, a start-up that uses artificial intelligence (AI) to carry out complex background checks needed in today’s “sharing economy”. We caught up with Husayn recently to discuss the impending rise and rise of RegTech and its relevance to compliance personnel, whether AI has finally found its niche and the inescapable BREXIT conundrum for small business owners based in the UK.


FT: The emergence of RegTech has widely promised better and cheaper AML, KYC and risk management compliance. With a ton Chief Compliance Officers at the helm of risk management strategy and scored of monies spent by large financial institutions in shoring up end-to-end client on-boarding and lifespan management, can we really expect the big banks to abandon manual KYC processing?

HK: As regulatory requirements continue to increase, financial institutions can’t afford not to abandon manual KYC processing. Not only is it slower and less accurate, it’s also not scalable, and the regulatory workload is quickly outstripping  compliance teams’ capacity. In Citibank’s case, 30,000 specialist compliance staff were recently recruited in an attempt to tackle the problem – a solution that’s simply not viable long term.

Using RegTech is a no-brainer for financial institutions. It enables them to easily meet compliance requirements, reduce their manual overheads and provide a smoother customer experience.

Adopting RegTech doesn’t mean that compliance teams will automatically become redundant, however. Rather, expert manual teams can be put to work on the ~5% of difficult cases that really need their input while technology manages the rest, using human resources more efficiently.

 

FT: Onfido recently launched the RegTech Principles for Innovation to encourage greater collaboration between regulators and financial services. Can you tell us what inspired the curation of the principals and how global regulators can better facilitate the end of bottlenecked innovation in the sector?

HK: We created the RegTech Principles for Innovation to educate the industry on the what RegTech is, and how it can benefit businesses, consumers and regulators. Regtech helps businesses comply with regulation without hindering customer acquisition: it means they can onboard at scale, creates a smooth experience for end users and keeps regulators happy.

With so much uncertainty surrounding regulation both in Europe and the US, we launched the RegTech Principles to provide guidance on how to manage the changing landscape. We’ve since presented the Principles to the US Treasury (among others) to help bring RegTech to wider awareness, and facilitate conversations that are otherwise difficult to have.  As a RegTech provider ourselves, we aren’t regulated, though most of our customers are; that means we’re able to have more open conversations with the regulators, and create a feedback loop which benefits the whole ecosystem.

 

FT: There has been talk, albeit muffled that BREXIT without secured passporting rights could lead to many of the UK’s leading banks opting to re-locate their compliance departments to other European nations. Has this been a challenge for you in courting UK-based banks and what are some of the questions or concerns that you’ve heard from customers in regards to BREXIT?

HK: One of the biggest concerns we’ve heard is around regulation – many businesses are unclear which regulations they’ll be subject to, what will change after Brexit and how they can make sure they’re being compliant. The UK will still be subject to a lot of EU regulation, including PSD2 and GDPR, but there’s likely to be new, UK regulation introduced after Brexit too. Though we can predict that things will change, it’s impossible to know how, and it’s this uncertainty that a lot of businesses are reacting against. In light of this, it’s more important than ever for banks and other regulated companies to have a RegTech solution in place, which will be able to take a lot of the burden when compliance requirements do inevitably shift.

 

FT: Where do you think the city you are based in ranks now, among the various global fintech hubs?

HK: London is still undoubtedly the leading global hub for FinTech. This is in part due to our open regulatory framework – while the FCA is committed to protecting consumers, it is careful to do so in a way that does not stifle innovation. One key initiative is the regulatory sandbox that’s recently been established by the FCA – it creates a feedback loop between regulators, businesses and innovators to help develop collaborative solutions. It’s this kind of open environment that will keep London among the leading FinTech hubs (no similar structure exists in the USA, for example), though new challenges will inevitably arise as Brexit gets underway.

 

FT: Onfido can count scores of scaling fintechs amongst its clients including the likes of Crowdcube, LendInvest, Nutmeg, GoCardless and Pockit. With machine learning playing such a pivotal role in a variety of your solutions, is it fair to say that AI has finally crossed the chasm from lab to live usage?

HK: AI – and Machine Learning in particular – is a core part of our product. Our Machine Learning technology reads documents for evidence of fraud with far greater accuracy and speed than manual teams. More importantly, it also evolves over time to become more robust. That means we are able to keep up with new, sophisticated types of fraud as they are developed.

The types of AI that are currently being widely used largely revolve around personalisation, insights and automation, but there are many more that haven’t yet made it to live usage. Over the last 20 years, big multinationals have started to realise the power of startups and sought new ways to catch up with them, launching of corporate venture funds and innovation labs. This isn’t enough. Over the next 5-10 years, more and more of them will launch AI labs as the digital divide between those who leverage AI and those who don’t becomes more obvious. Just as with the cloud computing revolution, AI and Machine Learning-based solutions will eventually become the norm: tried, tested and trusted.

 

FT: As the UK’s largest fintech exhibition, what will be the core message you would like to communicate to our audience at FinTech Connect Live later this year?

HK: A regulatory storm has been brewing since 2008, and it’s not likely to pass any time soon. With compliance pressures mounting, RegTech is FinTech’s best friend. By taking manual processes and automating them, RegTech can help financial services companies fulfil their regulatory requirements faster, cheaper and more accurately. Fostering the relationship between FinTech and RegTech should be everyone’s focus for the next 12 months.



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