1014.Insights: How do you onboard a borderless business?

0:14Welcome back to Fintech Insider. I'm Benjamin Ensor, and today we're talking about something that affects every business. Whether you're a fintech startup, a digital bank, a licensed financial institution, onboarding a business can be where the magic stops and compliance chaos begins. In this episode, in partnership with our friends at 3S, we're diving into why onboarding businesses is still so broken, especially for the mid-market. Too complex for small business flows, too small for enterprise-grade service, totally overlooked? We'll be digging into why Know Your Business for businesses, KYB or KYC, is still miles behind the sleek, streamlined experiences that people have come to expect in retail.

0:57We'll explore what it actually takes to onboard and verify complex business structures. Think multi-entity, multi-director companies. And why the industry continues to overlook the missing middle, businesses that are too complex for startup flows, but not quite big enough for enterprise-grade attention. We're also going to zoom out to focus on a bigger question. Are we seeing the rise of offshore banking 2.0? In a world of borderless founders, globally distributed teams, and decentralized operations, how do you even begin to onboard a business that lives everywhere and nowhere. Let's get into it.

1:37Firstly, we have someone who is very familiar with 3S and the work that the company does, the chief executive, Ivan Zyshnevsky, founder and chief executive at 3S Money. Welcome, Ivan. Can you tell our listeners a little bit about 3S Money, please? Hello, everyone. I'm Ivan. I'm a founder and a CEO of 3S Money. We build a state-of-art cross-border payments and effects platform for all sorts of cross-border businesses. No matter where the founders are based, no matter where the target market is, we're bringing them closer to their customers and we allow seamless transactions cross-border. The main product that we offer to them is an IBAN that can collect and send money for business purposes to and from any country in the world.

2:26And indeed, today's topic is resonating a lot with us as a business. and to me personally, because I was left out from the banking system myself when I tried to open a bank account in the Netherlands, being American national, living in the UK. So the true cross-border nature comes together and every single bank in that country said no to me. And that's how the whole idea of non-discriminating of founders based on their passport color came about. Lovely. Joining Ivan, we have a FinTech Insider debut for Rudolf Jäger, Senior Product Lead at OpenPaid. Welcome to the show, Rudolf. Please could you also tell our listeners a little bit about you and a little bit about your role at OpenPaid?

3:11Thank you, Benjamin. I'm Rudolf Jäger. I'm Lead Product Manager at OpenPaid, and I've been in the financial services industry for over 15 years. My career began in the asset management industry as an analyst and before I pivoted into fintech in mid-2010s, right as the sector was generating momentum, new banks were emerging and blockchain technology was entering the mainstream. So I had a little bit of a fear of missing out. So I decided to make a switch into fintech. And since then, I've been specializing in product management for internal tools that power onboarding and compliance processes with a focus on creating intuitive, efficient experiences for internal teams to accelerate that time to revenue.

4:00Before OpenPaid, I held product roles at Zopa and Checkout.com. At OpenPaid, I lead a squad dedicated to building onboarding technology and due diligence provider integrations, helping the business to streamline compliance processes and scale onboarding with confidence. Fabulous. It's my first experience recording a podcast, so I'm very excited for the opportunity to share my experiences and learn from the panel. Oh, fantastic. Well, welcome to the show. And I'm also delighted to welcome Emma Lindley, the founder of Women in Identity. Welcome back to the show, Emma. It's great to have you on again.

4:43Can you remind our listeners a little bit about you and a little bit about women in identity, please. Of course I can. Thanks, Ben. My name's Emma Lindley. I have spent about 20 years in the identity industry. I was part of a team that built the UK's first identity proofing tooling. Thought I was only going to do identity for a couple of years. Thought I'd fix the internet, fix identity on the internet and then would move on to something else. 20 years later, I'm still doing things with identity on the internet. So, yeah, I've worked a number of different roles. I was head of identity and risk at Visa, and I'm currently an independent consultant working with private equity firms, VCs in the ID and fraud space.

5:28Fabulous. Well, welcome. Okay, well, let's dive in. So, in this first part of the podcast, we want to discuss exactly what's sort of going wrong with onboarding for businesses right now. So people who have opened an account with a digital bank, which I imagine is quite a lot of the listeners to this podcast, will have gone through a pretty fast and often fairly easy process involving a selfie, you know, taking a picture of your ID and so on that takes maybe minutes, maybe, maybe 10 minutes if you're a bit unlucky, but a quick and easy process. But any of our listeners who've tried to open an account as a business may have had an experience a bit like yours, Ivan, or indeed, of course, you may have been talking about your experience as an individual.

6:16Why is it so much harder to know your customer checks for a business than it is for a consumer? Maybe let's start with you, Ivan. What's hard about it? I mean, I realize a lot of people know the answer to what's hard, but let's just get the basics out. What's hard? Well, the basics is that we're dealing with a legal entity. And normally a legal entity is more than one person. We need to identify who is behind, who is running it. And there's an other dimension to it as well. What business is this entity is conducting, whether it's genuine or not. So compared to retail banking, where we're identifying an individual.

6:57Here, from start, we're dealing with multi-layer identification of different persons and business activities, where consumer activity is quite simple, yeah? Doing shopping, going out for groceries, holidays, and stuff like that. Business activity is more harder to assess, and it's even more difficult to explain to customers that this information is required in details to get them on board. That's a challenge. Emma, do you agree? Is that right? Is it just that it's just more complex, or are there other factors as well? So I agree. I think KYC was, we figured that out quite a long time ago because it was an easier problem to solve, because you're just having to verify the individual.

7:45As Ivan says, when you're doing KYB, you have to verify that the company is a real company and it's on the official register of whichever country it's in. You then have to verify the directors and the shareholders. And then what you've got to do is, dependent on which jurisdiction that you're regulated in, you often have to get to the ultimate beneficial owner. And the challenge with that is the ultimate beneficial owner can often be in a completely different country, as can the directors and the shareholders. So even if you're, perhaps you're a payments company and you're verifying a business that's in the UK, you will still have to potentially hop across jurisdictions to verify the directors, the shareholders and get to the ultimate beneficial owner.

8:37So it is more challenging. It's more of a process than it is just being able to take identity documents. And for all of those directors and shareholders, you have to verify the individual identities as well. So you're saying there's sort of two levels of complexity. One level of complexity is the fact you've got sort of multiple individuals and multiple entities and so on involved. And then the second one is when you throw in the cross-border dimension, that it isn't necessarily a Singaporean company with Singaporean directors operating in Singapore. It's a Singaporean entity with directors from Malaysia and Indonesia and wherever.

9:10With directors all over the world. And that's really challenging, right? So even if you think that you're doing business with businesses in the UK, it means that you end up having a cross-border element to your verification, even though you're just doing business with businesses in the UK. Rudolf, I'd love to bring you in as well. We've sort of got used to fintech businesses, you know, just coming up with amazing innovations that make everything simpler. And of course, you know, that's happening all the time. But it does seem this problem has been quite an intractable one. We've seen progress.

9:41What do you think? How much progress are we seeing? I think the key issue with business onboarding is it's not as formulaic as KYC. So you can only create onboarding rules up to a point. At which point it's about trust, it's about gaining that understanding of the business. And it's a discovery journey. So you're on the discovery journey with your client and during the compliance interviews, for example, with the business, you might discover some aspects that you want to explore further and request additional documentation, for example. So that is very hard to put into a rule set. But the progress has been made, of course, in the KYC space.

10:27So that friction of requesting two plus two from the directors and the shareholders has now largely gone away. And that speeds up KYB a lot. But there is still the inevitable element of the trust building and the discovery aspects of the business that is still very hard to automate. Ivan, I'd love you to build on that. Obviously, there are some sort of red flags that all of us can imagine that if a business is involved in, I don't know, gambling or pornography or arms trading, obviously that's going to be a little bit more difficult to sort of onboard. So presumably there are certain activities that businesses can be involved in.

11:05But what are maybe, are there some other sort of things where you know, hang on, as soon as a business is involved in this, it's going to be complex. So are there certain jurisdictions, certain countries in the world where maybe all the records are on paper? Are there certain things where you hit something and you're like, oh no, this is going to be more difficult because X, Y, Z? That's a spot on question. Actually, I think one of the challenges in business onboarding is the mindset, the compliance mindset. Because we're trying to use old risk assessment tools for modern world. And it's largely based on nationality or country of residency.

11:46right oh there's a nigerian founder behind this business and it was just set up a few weeks ago can we trust it no we can't it's high risk we don't want to deal with it yeah uh that's what's happening a lot and it puts lots of different people off the financial services industry and actually prevents them from making money and doing good business and offering their fantastic services cross-border also thinking about all these threats oh it might be a pornography or it might be gambling or something unregulated. And at the end of the day, we're all so scared that we don't want to make a judgment call.

12:23We're scared to make a decision. And again, that puts a lot of good businesses off. But to tackle, I think, and I agree with Rudolf, that FinTech made a tremendous progress in creating a fairer risk assessment journey for those businesses that high street banks can learn from. And let's define what the quick onboarding actually means, because the definition of what's quick for business and for individual is very different. If a cross-border legal entity can open an account and if we can onboard them, say in 10 days, this is super quick. It equals instant onboarding of an individual with Revoluta Monzo, right?

13:10So with high street banks, this onboarding journey for these cross-border entities can take weeks or even months. So if we can shorten it up to two weeks, we win. So let's build on that mindset point. And Rudolf, you were sort of alluding to it a little bit around sort of how do you get to the point where you trust that you can take a business sort of on board? How do you sort of shift from a sort of maybe purely sort of rules-based box-ticking approach to more of a sort of trust scoring type of approach where you say, okay, we got to the point where we're comfortable with this. I think there's still a lot of mileage to go in bringing teams together and the data that you collect about the customer together.

14:00So that's where I came in from the product perspective is that we have largely solved the issue on the customer side. We all know how to design a good onboarding form. But what happens once that form is submitted to the internal teams? Often the experience of the onboarding analysts is ignored and they're assumed to, they will just find out their way. And you have disjointed information sources, you have multiple systems, you just really have a poor UX. for the hardworking analysts. So in changing that mindset and giving that product attention to the internal tools, you can gain a lot of reduction in times revenue by bringing the systems together, by exposing the data at the right time, by making sure all the customer information in the right place.

15:02So that the analyst can make that trust decision much quicker. Very interesting. What do you think, Emma, on this sort of mindset point that Ivan's making? Do you think that's right? Is that part of how we get better at this? I swear that there's a few parts to this. I think the compliance people are scared by the regulation and the regulators, right? So they're frightened if they get it wrong, that, you know, they'll end up with a fine or having their license taken off them or whatever else. And one of the challenges that I think we have with business onboarding is the availability of the authoritative data sources, particularly when you go to some of these jurisdictions.

15:47So you mentioned gambling. I mean, I've worked with the gambling industry and onboarding for a long period of time. And I actually, I mean, some of those businesses are incredibly well-grown. They're not risky businesses. and, you know, lots of payment companies, you know, onboard those businesses all the time. I think one of the challenges that we have with those types of organizations is because they sit in, they often sit in tax havens and those tax havens don't have the authority data source available for organizations to verify against. So if you're, you know, Curacao, Cayman Islands, you know, I'm going to do gambling, tax haven, bingo, Gibraltar, some of those, it's quite hard then for analysts to go, okay, I can now access that data source because actually that data source might not be available and might not be open.

16:38So I think there's a regulatory piece where a lot of the, you know, there needs to be regulatory pressure put on some of those jurisdictions to make that data open and available. I know that's kind of a big statement, but I think that would make a massive difference because then the data would be accessible and analysts then could go, okay, you know, I can access the Cayman Islands registry. And then I think what we are seeing in the industry is we are seeing organizations starting to build KYB systems from the bottom up. So what I think we've seen historically is organizations say, well, we've got a KYC system, we're just going to tag some KYB capabilities onto it.

17:20That doesn't work, in my opinion. What you need is, it needs to be purpose built for KYB because it's this process and actually then the analysts need to see where the application's up to because it might be five days in they need to know what data has been compiled and then be able to know what data they still are waiting for to make that that complete onboarding and what I think we have seen in probably the sort of last five years is the identity industry starting to to see some of those kind of new startups you know just a put a couple of names out there, like Detected is one of them, but they've actually built a KYB system from KYB, the problem, rather than going, we've got a KYC system and we're going to tag some of that on.

18:07So I think we are starting to see it, but I work with lots of companies and have done historically, particularly payments companies who were trying to onboard gambling companies that have huge challenges with trying to do KYB. And I don't think it needs to be as hard as it is, both from a tooling perspective, but also the regulatory perspective, to Ivan's point. You know, the regulator enforces the regulation, but is not taking into account the fact that the data might not be available. And it makes it almost impossible. Ivan, you've obviously built 3S Money to sort of try and tackle some of these problems.

18:46I mean, particularly around where you've got a founder who's born in one country, passport from a second country, setting up a business in a third country, or maybe multiple founders all from different places come together. What have you learned about sort of trying to design the onboarding clothes to work better, kind of along the lines Emma was just talking about? I think Emma made a very good point. And it is if you don't understand what gambling is, you should not onboard a gambling company. The international businesses became so diverse. And we witnessed that at 3S Money in the time of COVID, when people and founders realized that you don't have to travel to set up a business.

19:27You can sell everything online. You can register your business online. You don't have to be present in another country to offer your fantastic product to other people. And that led to a whole new generation of very diverse, small and medium-sized businesses that started to enter cross-border space. And compliance analysts cannot be expert in all industries, in all types of businesses that exist in the world. And because it's so diverse and all these applications are coming to us daily. Today, you're dealing with an importer from China. Tomorrow, you're dealing with financial services custody for securities from Luxembourg.

20:13And tomorrow, it's a digital nomad from Dubai that is dealing in apps development. Right. And you cannot possibly know all these clients, all their flaws. And actually, I think a compliance job is very exciting these days because you're learning about so many different things daily, right? And therefore, I believe that there should be industry specialization within FinTech, where I'm dealing with international trading flows. And 3S is entertaining that. Logistics companies, flow of goods from China to Europe. And we're experts in that. We know how to assess that, but we know nothing about gaming or gambling.

20:59We know nothing about some other areas of business. And if you try to create a product for everyone, then, well, many people are getting upset. It's better to be best in class in one thing. Rudolf, what do you think? Maybe if you could solve sort of one thing, if you could sort of try and fix one of these sort of multiple levels of problem we've been talking about, what would be maybe one of the ones that would make the most difference? I think absolutely right to Emma's point, inconsistent data formats. Like you have hundreds of global registries and I'm not even going to try to reconcile how...

21:45even the simple address field is defined in different registries. There are, of course, the aggregators that are emerging that are trying to solve that problem. But you still have to manually map that into what those fields mean for you internally. So there is still a huge opportunity for unification of KYB data standards and data formats. Emma, if you could wave a magic wand, And what would be sort of one of the things you'd wave a wand at to try and fix? I would fix the global registry problem. I would fix the data problem. Data is, and I've been talking a lot about data in relation to AI, because everyone's getting very excited about generative AI and AI and what can be done with it.

22:34But at its baseline, you know, and this is the same with the registry. if the data is not available or if the data is really poor, you actually can't do anything. And data is not sexy, unfortunately. Nobody likes to talk about data. But I think it's one of the really big issues. If the registry data was made available, and I'm not saying making it available because we had a huge problem in the UK, which they've only just tried to fix recently, where to get a business put on the UK registry, you didn't have to go through an identity verification process and the data was publicly available. So we had a huge amount of problem with fraudulent businesses being put on the UK business registry and then also people stealing people's data and identities off the UK business registry.

23:26So I'm not saying that. I'm not saying it should be open and I'm saying that there should be an identity verification process to get on the registries, you know, in the Cayman Islands or Curacao. But having a license to be able to access that data, you know, if you're a fintech or if you're one of these ID companies and that data is made available and the UBO information is made available, you know, they have to take it and they have to make it available. I think that would really make the, you know, the biggest, and there's no silver bullets in any of this, but that would make one of the biggest impact changes to the KYB process globally.

24:02The UBO being the ultimate beneficial owner. And of course, one of the attractions of some of those tax havens is precisely that they don't reveal who ultimate beneficial owners of certain companies and so on are. So there's a sort of political problem there, is there not? Yeah. I mean, I didn't say it was an easy problem to solve. No, you didn't. I didn't say it was an easy problem to solve. It was your magic wand problem. You asked me a specific question, how do we make it easy? I gave you a very specific answer. That's what would make it easy. I'm not saying it's an easy problem to solve. And I'm not saying it's a politically popular thing to do, but that would really solve it.

24:42because the challenge is obviously sometimes the UBOs aren't just trying to hide from tax. They could be in a, you know, could be in a nation state actor that is supplying, you know, money because they're laundering money for arms and, you know, human trafficking. So it's not just to do with tax havens. I think the challenge is they then hang out in some of those places and that, you know, it's a multi-layered problem. So, Ivan, what would be the thing that you'd most like to try and fix overnight, again, if you had a sort of magic wand and could magically fix something? I would like to fix up distrust in financial services industry because that's a major problem.

25:28If we could rely on each other, that would greatly help to identify these businesses and people behind them and everything else. Because imagine this relatively complex entity with a couple of founders in different countries and the business in a third country and then suppliers all across the world. And then they're getting on board, losing weeks of their time into one fintech or one bank. And then they need another account with somebody else. And the same thing repeats itself. And there's a massive distrust across financial service industry. Everyone keeps repeating, we cannot rely on somebody else's assessment.

26:07We need to make our own judgment, our own judgment calls, which is the right thing to do, of course. But we are in a licensed, regulated environment where we suppose that other actors are, other players are observing the same rules. So what I propose is to create the level of trust that open banking has created in this country, where we can source the data directly from another institution because they already made, not even the assessment, but just source those data points that we expect a client to supply to us because they're already verified by another trusted party. So again, I give an example.

26:50A client comes to us, comes to 3S Money with an account at HSBC and they just need a currency that HSBC cannot offer to them. And they allow us access like open banking to their banking details, to their bank statement. And then we can analyze this data, process it and get them on board much quicker than if we just ask the same questions directly again and again. I think that's an interesting point because they've in the UK they have actually the regulation does allow you to do that for individuals. So this kind of idea of reusable digital identity because it's been paving the way for the digital identity scheme and the reusability element of that.

27:37So it is allowed, to Ivan's point, it is allowed for individuals, but we don't have it for businesses. So yeah, I mean, that would be another thing that would be helpful. Fabulous. Okay, we're going to take a quick pause here for a quick break. And coming up, we will dig deeper into some of the bottlenecks surrounding onboarding and how to get everyone on the right track. Hey folks, David Breer here, CEO of 11FS. Here's something you might not know about me. I get a lot of people trying to impersonate me online. Fake profiles, scam emails, the lot. And a big part of that comes from data brokers, hundreds of them quietly collecting and selling your personal information.

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