Why do financial institutions exist? To help other people store, manage, and move their money. Over time, different financial institutions have emerged, including banks. There are other important elements of the financial world such as hedge funds, network partners, and card programs like Visa and Mastercard that give people financial freedom. One of the more recent additions to the financial world is fintech businesses. Much like a bank, fintech companies provide financial services, such as money management, and allow customers to move funds across borders.
But fintech-as-a-service platforms such as Rapyd offers other businesses greater financial opportunity at a fraction of the cost. Fintech companies are regulated in a similar way to other financial institutions. Certain rules have been established that need to be followed.
What do financial regulations help to prevent? Regulations not only help combat fraud, but also provide a risk analysis for a potential business relationship in the world of finance. There are two processes in place that help meet these goals: Know Your Business (KYB) and Know Your Customer (KYC).
KYC, KYB, and Meeting Financial Regulatory Requirements
KYB, or Know Your Business, is a process that allows a financial service provider to verify the identity and validity of that business. The Know Your Business process involves submitting information about the company, authorized user information, shareholder information, and financial compliance information.
Rapyd collects the KYB information through an application submitted after account creation. The information is verified before the business is approved to work with Rapyd. A list of restricted businesses that cannot work with Rapyd can be found here.
KYC, or Know Your Customer, is a process that allows a financial service provider to verify the identity of the customers that use their services. The customer provides a personal ID in addition to a few personal details in order to verify their identity.
Rapyd collects KYC information through Rapyd Verify, a service that uses a hosted page for customers to submit their personal information for identity verification. Verifying customers provides an additional layer of security and allows businesses to stay safe.
The KYB and KYC processes are requirements established for financial institutions and other financial service providers as part of the AML, or Anti-Money Laundering efforts. These requirements protect everyone involved, and allow security and safety to be prioritized when providing financial services.
Who is the Best Fit for Fintech Service Providers?
When a business considers using a fintech service provider in order to expand their business, a type of business-to-business, or B2B relationship needs to be established. The first step is for developers, or other key stakeholders within the company to explore the products and services that a fintech service provider has to offer.
Rapyd provides such an opportunity by allowing developers to sign up for a Client Portal account, grab their API keys, and begin experimenting with Rapyd’s API in the sandbox environment. Sandbox allows developers to simulate payments and use a variety of payment method types in order to test API Integrations.
If the business decides to move forward with Rapyd, they can apply for a production account by submitting a KYB form that allows Rapyd to verify their business. The approval process can last for a few weeks. When the evaluation process is complete, the business is either accepted or rejected by Rapyd. If accepted, the business can begin receiving payouts and making payments using Rapyd’s financial network, which has expanded into many different countries.
When a business has been verified and has received account approval, the business signs a Merchant Service Agreement that specifies which Rapyd services and payment method types will be used. The business can then begin API integration, and embedding Rapyd’s systems into their application or business offering. One simple example is the Rapyd Hosted Checkout page, which can be rebranded to meet your business needs, while allowing customers to pay for online goods and services with relative ease.
If a business receives an account rejection after the KYB process, then that business will no longer be able to work with Rapyd. Either the business falls into one of the restricted categories above, or a number of different regulatory or compliance regulations may prevent certain businesses from being able to transact using Rapyd’s services.
Similar to when someone may get rejected by applying for a credit card, not everyone will be the best fit for a business relationship. But the KYC and KYB process allows Rapyd to foster due diligence when evaluating potential B2B relationships.
Keeping Businesses Safe through AML and Fraud Detection
KYB and KYC serve as the foundation for protecting businesses from money laundering and fraud. Unfortunately, there are bad actors that may see a fintech platform as a method to conduct illegal financial operations. Rapyd is committed to complying with all regulations in the jurisdictions it operates in order to prevent this.
AML, or Anti-Money Laundering, is a series of security and compliance practices meant to detect and combat possible fraudulent activity. Through the KYB and KYC processes, businesses and customers are verified. Potential bad actors are identified during these processes.
Legitimate businesses are also protected by this process, since verification is a key security principle. Rapyd also helps to combat fraud through Rapyd Protect, which allows a business to set “rules” around their transactions. If those rules are broken, the transaction is flagged and sent for review.
Rapyd Protect uses a key fraud detection principle called red flag identification. Red flags are representative of suspicious behavior that is indicative of fraudulent activity. So, if a rule set states that 10 or more transactions in 24 hours is not allowed, then frequent transactions over a short period of time is labeled as a red flag behavior.
Identity verification through KYB and KYC is another fraud detection technique by determining if a business is legitimate, or a shell company being used to launder money.
Overall, the B2B relationships formed between businesses and fintech service providers are a key component of the fintech landscape. Due diligence processes such as KYB and KYC allow fintech service providers to determine which businesses they can work with, in addition to combating money laundering and potential fraud. Financial regulations work to keep everyone safe and receive the best services possible.
When you’re ready to find out more about Rapyd, make sure to get your API keys to test Rapyd’s API. You need to:
- Sign up for a Client Portal Account.
- Click the I am a developer checkbox during the sign-up process.
- Verify your email and log in to the Client Portal.
- Toggle the sandbox environment at the top of the Client Portal account page.
- Navigate to Developers > Credentials Details.
- Grab Your Sandbox API Keys.
- Visit the Rapyd docs to download our Postman Collection.
- Enter your API keys into Postman.
- Test Rapyd’s API.