From meme stocks to crypto, 2021 has seen increased interest in new financial opportunities<\/a>. Perhaps it\u2019s a response to the great resignation<\/a> as people are leaving their jobs in more significant numbers than ever before and looking for other ways to make money. Another factor might be the ease of opening up a new financial service account and the blossoming of the range of financial options available. New services are making it easier than ever to save and invest, and new technologies are removing restrictions (such as high fees and minimum investment levels) while simultaneously offering innovative investment models.<\/p>\n\n\n\n One example is the convergence of open banking regulations, API integrations and fintech business models that enable Banking as a Service<\/a> (BaaS). BaaS is a new financial opportunity and business model for outsourcing banking services to third parties. Banks can act as platforms, providing services to new digital banks or other organizations. BaaS can also work the other way, with fintech companies offering their services to banks.<\/p>\n\n\n\n Another example is embedded finance<\/a>, which simplifies organizations integrating financial services into their offerings. These integrations allow financial services providers to expand customer relationships, increase revenue and profitability and deliver new services and offerings without the time and cost of traditional customer acquisition. Todd Latham, chief growth officer at Currencycloud, states,<\/p>\n\n\n\n \u201cEmbedded finance will be the next stage in the evolution of fintech<\/a>. Payments, wallets and banking-like services will become an integral part of internet-led companies spanning all aspects of the global economy.\u201d<\/p>\n<\/blockquote>\n\n\n\n The growth of the buy now, pay later<\/a> (BNPL) sector is evidence of the success of the embedded finance model, with Bank of America predicting growth of 10x to 15x by 2025. Transactions may eventually reach $1 trillion annually.<\/p>\n\n\n\n Blockchain initiatives have also gained a lot of attention as ways to change financial services. While the price of Bitcoin and other cryptocurrencies make the most news, developments in decentralized finance (DeFi) might prove to be the most significant change in the long term. The World Economic Forum in their DeFi Policy-Maker Toolkit<\/a> states:<\/p>\n\n\n\n \u201cOpen-source technology, economic rewards, programmable smart contracts and decentralized governance might offer greater efficiencies, opportunities for inclusion, rapid innovation and entirely new financial service arrangements.\u201d<\/p>\n<\/blockquote>\n\n\n\n Another possible game-changer is Non-Fungible Tokens (NFTs<\/a>), which has seen the value of tokens sold in the 3rd quarter of 2021 expand 823% from the previous quarter. NFTs are provable as unique, digital assets so that each NFT can be valued, and sold, individually.<\/p>\n\n\n\n They can also be connected to smart contracts, which provide the asset with certain, unalterable attributes. These contracts that auto-execute are only limited by the creativity of programmers and designers. The result is NFTs enable multiple use-cases<\/a> that promise to change digital interactions. NFTs aren\u2019t just fancy digital collectibles but are a way to bring foundational business concepts such as ownership and contracts into the rapidly developing web 3.0 metaverse<\/a>.<\/p>\n\n\n\n With the speed of innovation and whole new models of financial services comes additional risks of theft, fraud, hacks, manipulations, money laundering and other financial crimes. As Andrew W. Lo, Director of the MIT Laboratory for Financial Engineering puts it:<\/p>\n\n\n\n \u201cOver the last 20 years, the speed of innovation in technology has greatly increased. It\u2019s been going great guns. Historically, regulation has been one or two steps behind<\/a>. Now they\u2019re maybe three or four steps behind, and that gets to be dangerous.\u201d<\/p>\n<\/blockquote>\n\n\n\n While lawmakers and regulators are hard at work trying to understand the implications of changing technology and create safe and fair markets, they also want to be very careful not to hinder progress unduly. Industry participants who want to be forward-thinking should consider the intent of current regulatory requirements and how they project onto any future developments. Anticipating any financial innovation that becomes successful will, at some point, draw the attention of regulators is not far-fetched.<\/p>\n\n\n\n Consider the Travel Rule<\/a>, the Financial Action Task Force (FATF) guidance on how governments should \u201cobtain, hold, and transmit required originator and beneficiary information\u201d when it comes to cryptocurrency transactions. Since the FATF is on record as recommending collecting this information, most jurisdictions will either already require it or have plans to do so.<\/p>\n\n\n\n One reason behind the FATF decision and numerous financial laws is the continuing threat of money laundering. This year, the Pandora Papers<\/a> made international news with its comprehensive expos\u00e9 of financial secrecy. The Papers were a trove of 11.9 million leaked documents exposing shell accounts of over 100 world leaders, billionaires and celebrities, demonstrating the ongoing need for strict Anti-Money Laundering (AML) laws.<\/p>\n\n\n\n In the E.U., 6AMLD<\/a> came into effect, and now employees and officials of organizations \u2014 and entities working on behalf of those organizations \u2014 can be held criminally liable. The Directive sees no distinction between directly benefiting from money laundering and those overtly aiding and abetting it, so organizations that aid and abet criminals in laundering their illicit gains are also potentially criminally liable and could face very serious consequences.<\/p>\n\n\n\n As the E.U. often leads in these types of legal initiatives, it wouldn\u2019t be surprising to see similar penalties start to appear more globally.<\/p>\n\n\n\n One common thread amongst all these digital opportunities and threats is the need for trust. There needs to be a way to understand who you are interacting and transacting with online. For compliance purposes, to understand the level of risk, deter fraud and create safe online environments and relationships, there need to be effective identity processes.<\/p>\n\n\n\n Trulioo commissioned independent research to examine consumer attitudes and behaviors around online security. These insights are available in the New fraud threats in the digital-first world<\/a> report, which concludes:<\/p>\n\n\n\n \u201cBrands that can reassure consumers that they\u2019re protecting them from online fraud and identity theft efficiently and conveniently can build increased trust, loyalty and engagement. And as our reliance on digital services continues to grow, this will become an even more essential ingredient for success as businesses move into an uncertain future.\u201d<\/p>\n<\/blockquote>\n\n\n\n This is a critical time in the identity verification industry, as global demand for digital trust, security and compliance solutions skyrocket. There have been numerous developments in identity verification and fraud prevention, with lots of financing and M&A activity in 2021 alone. One example is the Trulioo Series D funding<\/a> of $394 million at a $1.75 billion valuation. The global pandemic has pushed identity verification to the forefront for businesses and service providers. Anyone who has a stake in onboarding users and transacting with customers online needs to be thinking strategically about their identity verification programs.<\/p>\n\n\n\n\n
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![\"Expanding](\"https:\/\/www.trulioo.com\/wp-content\/uploads\/2021\/12\/Expanding-the-Regtech-guardrails.jpg\")
<\/figure>\n\n\n\nExpanding the Regtech guardrails<\/h2>\n\n\n\n
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![\"Identity](\"https:\/\/www.trulioo.com\/wp-content\/uploads\/2021\/12\/Identity-as-a-core-enabler-and-protector.jpg\")
<\/figure>\n\n\n\nIdentity as a core enabler and protector<\/h2>\n\n\n\n
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