Neobanks have disrupted the traditional banking industry, offering customers the ease and convenience of accessing their accounts and making transactions quickly, on the go.
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Neobanks have disrupted the traditional banking industry, offering customers the ease and convenience of accessing their accounts and making transactions quickly, on the go. While a "fail fast and learn fast" approach may be common among these companies—especially as they look to increase account openings—it may happen at the expense of customer due diligence, according to a new study from ComplyAdvantage.
What's more, in recent months several high-profile fintechs have been the subject of anti-money laundering (AML) probes. For example, UK neobank Monzo disclosed in July that it was under investigation by the UK's Financial Conduct Authority (FCA), also its home-market regulator.
"Moving forward, digital players will have to increase AML compliance, particularly when they are in their early stages, to avoid losing customers' funds or betraying their trust," said Tom Auchterlonie, banking analyst at Insider Intelligence. "They might also consider turning to regtech-focused companies, such as Alloy, for assistance with AML and Know Your Customer (KYC) processes."
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A sizable number of US consumers are hesitant to move their primary banking relationships to digital-only players due to security concerns, per a new survey from PYMNTS and Optherium. The apprehension around fintech security could enable neobanks to seek out stronger compliance efforts, partnerships, and possibly third-party solutions to reduce fraud and money-laundering incidents that could harm their reputations.
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