Financial technology has dramatically impacted the nature of business. It has highly increased customer engagement, constructed new payment options, assisted in new product creation, etc. By using technology as a solution and tool, many companies have increased their efficiency and customer experience.
Besides all the benefits fintech offers to traditional businesses, it also gives a banking opportunity to digital and more complex business models that are commonly unbanked by the traditional financial institutions, mostly due to its novelty and intricacy. Fintechs have found a way to be inclusive to businesses like this by applying different risk tiers.
What is a high-risk business?
High-risk businesses are merchants who are perceived to have a greater risk of financial failure or being non-compliant with existing laws. The level of risk usually depends on two main criteria: certain industries and specific situations.
Some high-risk products and digital business industries usually flagged by processors include online casinos, cryptocurrency, and subscription-based services. Also, regulated businesses may attract additional attention, such as pharma and online drug suppliers, adult content and dating services, tobacco products, sports betting, and companies assisting in offshore business activities.
These sectors often offer big payoffs. At the same time, they are more exposed to money laundering, chargebacks, and fraud.
Despite their unusual or delicate nature, not all high-risk businesses are harmful. Industries like these need extra attention and resources from financial institutions to ensure business processes are safe and legit. For this specific reason, Nordiceur invests in AML procedures, and for compliant businesses offers Ultimate Business Plan, which gives an opportunity for complex industry representatives to open dedicated European IBAN accounts, use virtual banking cards, and enjoy unlimited SEPA transfers.
Anti-money laundering (AML)
Anti-money laundering is a set of policies and procedures ensuring that illegal funds won’t enter the legitimate financial system. It’s one of the core fintech structures, as it helps to prevent financial crimes like fraud, corruption, tax evasion, theft, and embezzlement.
Fintechs constantly invest enormous resources in AML practices. This is why they are among the more advanced in comprehensive risk assessment.
Procedures like Know Your Customer (KYC), Customer Due Diligence (CDD), and Enhanced Due Diligence (EDD) help to collect relevant client information, which helps indicate potential risks. Customer details are analyzed and screened against multiple online databases, such as politically exposed persons (PEPs), government records, watchlists, and sanctions screening.
In traditional bank cases, such checks may take weeks and months to complete and can cost a fortune. But if joining a fintech, you may forget about complex monitoring and verification, as Fintechs offer more technologically advanced onboarding and AML procedures, to simplify customers’ lives.
The Bottom Line
Convergence between Finance and Technology is ushering in a new era of transparency, efficiency, and inclusivity that reshapes customers’ expectations and sets higher standards for user experience and satisfaction. Although it has not made traditional financial companies completely obsolete, FinTech is revolutionizing the global financial landscape by forcing traditional institutions to review their outdated business outlook and come up with more effective, customer-centric, and less expensive solutions.