Fintech’s new role in times of conflict and relocation

The world is in the midst of geopolitical upheaval. Russia’s invasion of Ukraine has displaced millions of people and threatens global food security. Elsewhere, refugees have fled for their lives from Syria to Sudan, on dangerous journeys to safety or asylum.

Under such circumstances, people leave their homes in a hurry, often without a valid passport or other identity documents. This can quickly lead to short-term financial exclusion. To curb this, fintech companies are looking for ways to ensure that people can access the information they need to quickly rebuild their lives.

Kateryna Danylchenko is the CEO of the International Bureau of Credit Histories (IBCH) and has experienced both sides of this tough situation. Since the war came to Ukraine, she has closed her offices, evacuated employees and sought refuge in France.

She says: “With limited or no documentation and no access to some bank accounts, refugees and migrants were often met by a brick wall when trying to find work, accommodation or make payments in the host country.

“Since the start of the conflict in Ukraine, rapid progress in fintech in recent years has allowed me to continue to access basic financial services, whether I open an account in an alternative digital bank, send money to family and friends, book temporary accommodation or to be able to identify myself as a landlord. “

Fintech solutions have also made it possible for Danylchenko to top up her mobile phone account so she can communicate with friends and family. It also meant that she could buy plane tickets for a woman and her daughter, whom she met in a crisis center in Kyiv, so that they could move to Madrid.

But given that IBCH is a Ukrainian subsidiary of fintech firm Creditinfo, a credit rating agency that focuses on leveraging alternative data in emerging markets, Danylchenko also sees on its own how this can be used by fintech companies to help refugees when a major challenge remains. identity authentication.

Creditinfo collaborates with central banks, international monetary organizations, banks and other financial institutions to provide refugees in Poland, Moldova and the Baltics with access to credit reports used as stand-in for this identity information.

Danylchenko says that fintech initiatives will continue to play an important role in Ukraine – and beyond – in facilitating access to at least basic financial services for refugees. But she argues that while developments such as open banking and open finance have provided better connectivity within regions, financial services and transactions are increasingly international.

Danylchenko says fintech companies are well positioned to deliver enhanced cross-border compatibility, but warns that this will only happen if governments and central banks keep up with potential and do more to provide international bridges.

“The war in Ukraine has highlighted how cross-border economic connectivity is not as strong as it could or should be,” she adds. “If a country is excluded from a global payment infrastructure or if you know that your customer (KYC) and credit history data cannot be shared across national borders, then it is often people fleeing war who have difficulty accessing finance while resettled. “

Mikkel Velin, co-CEO of the embedded finance provider YouLend, also sees KYC as a major problem, given strict identification requirements that can exclude refugees from such as mortgages and corporate financing. Fintech, he suggests, provides an answer by focusing on more data streams that can be analyzed much faster.

“The main problem is discrimination and misunderstandings – possibly subconscious – about what data is needed in the 21st century to determine if someone is eligible to access certain products and services,” he says. “Larger data sources and open banking services can enable banks and lenders to make more concrete risk assessments.”

Elsewhere, other companies solve other problems. For example, cheqd provides a technology for people to take control and ownership of their data, known as self-sovereign identity (SSI) or decentralized identity. A similar SSI solution was previously piloted by Tykn – now a cheqd partner – which allows the Turkish government to optimize and speed up the issuance of work permits to refugees and then keep the validated documents in a digital wallet.

There is another critical area fintech companies need to consider when it comes to conflict, and that is the enforcement of global economic sanctions, such as those imposed on Russia. Many fintech solutions are being deployed to prevent fraud in this area, starting with SEON which recently raised $ 94 million (£ 77 million) in funding for just that purpose. The war in Ukraine is now driving demand for anti-fraud solutions to combat the evasion of sanctions by politically vulnerable people.

SEON CEO Tamas Kadar explains how machine learning democratizes fraud prevention and fraud detection, so that fintech can ensure strict measures that make it possible to maintain current sanctions.

“Fintech companies can do their part to help cut off some of the resources that flow back into the hands of unpleasant players,” he explains. Without careful management, fintech companies may soon find themselves being used to circumvent these sanctions.

“Without the right strategies and technologies in place, such solutions have the potential to be exploited. The fallout will not only affect individual fintech companies, but may lead to the industry being seen in a negative light by some who move forward. ”

Gabriel Hopkins, product manager at Ripjar – which was founded by former GCHQ technologists – agrees. The company uses artificial intelligence to combat financial crime by automatically identifying risks from data and transforming institutions’ approaches to knowing your customers and anti-money laundering (AML) solutions.

Hopkins admits that the implementation of these sanctions is “extremely complex” given the ties between Russian individuals and companies to Europe and the United Kingdom. This poses a major regulatory challenge for the industry, including for fintech companies such as neobanks, which are 100% digital and use apps and online platforms instead of branches, and others that trade internationally.

He maintains that banks and other financial institutions must have a “balanced approach to sanctions and watch list management” to guarantee “100% compliance” with global sanctions lists while using other additional lists for a comprehensive view of risk.

Part of the puzzle to solve this is through machine learning and advanced analysis to automate the screening process, he says, with next-generation name-matching software that ensures banks and financial players can: “Maximize true positive hits on global sanctions and watch lists and minimize false positives . ”

But to achieve this, Hopkins highlights one major advancement that will be crucial and needed soon – fintech companies that use a variety of language systems.

He adds: “In the future, there will be a greater need to process hits that include Cyrillic, Asian and other character sets with Western or Latin names and vice versa. Being able to distinguish and draw links between Latin and non-Latin language systems is the key to names that have alternative spellings.

“For example, Vladimir may look completely different and must be traced separately, but also treated as the same name.”