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The FinTech (short for Financial Technology) sector is one of the more promising “up and comers” in the technology industry. Not only have FinTech companies showed some positive signs this year, but the sector in the global sphere is meeting success. For example, according to a recent KPMG report, global investment in FinTech companies reached $8.4 billion through 293 deals. This still doesn’t compare to the records set in 2015, but it does demonstrate how the budding industry is still alive and well.
However, the FinTech sector isn’t without its problems. In fact, sometimes it’s easier to commit fraud through FinTech companies than it is large banking corporations like Bank of America or Chase. In an example from 2016, a Lending Club shareholder dug into their loan data only to discover what he thought might trigger the next credit crisis. One specific case involved an individual who had opened two “new” lines of credit in the same month. But the interest rates were drastically different, even though they were for the same person. The investors in the second loan (with the lower interest rate) were getting cheated out of money, and Lending Club apparently wasn’t doing anything to stop it.
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FinTech companies are also plagued with identity fraud cases, despite concentrated attempts to prevent them. One study from earlier this year estimated that FinTech and traditional businesses lost around $16 billion last year due to identity fraud. Unfortunately, it doesn’t look like it’s slowing down.
So why are businesses, FinTech companies in particular, such popular targets for identity based fraud? In essence, it’s because individuals don’t actually own their identities. Rather, personal information is stored in centralized locations (like Equifax’s central servers) where hackers and fraudsters can steal millions of people’s data in one breach.
The answer to this problem is decentralization. One blockchain based startup, SelfKey, is creating a blockchain-driven decentralized digital identity system that gives users full control over their personal information. The platform allows individuals to create their own secure personal identity wallet that stores important identity documents. This wallet also stores KEY tokens, which can be used to purchase services on the SelfKey marketplace. These services, which range from passport applications to opening bank accounts, don’t control users’ data–users do.
This means that when individuals submit applications, they control when their personal data is shared. With the existing traditional systems, this isn’t the case. After someone applies for a Capital One credit card, their mailbox (email and physical) is flooded with “deals” from companies like Mastercard, Visa, Barclays, and American Express. Once a person applies for one credit card, their information is released to all the other credit card companies who now know they’re looking for a new line of credit.
With SelfKey’s platform, it is exactly the opposite. Users have the key, so to speak, that releases their own data. The only entities that can view an individual’s data are the ones the individual chooses. Additionally, an individual’s data is stored locally on their device, rather than in SelfKey’s server or in the blockchain.
SelfKey and the FinTech Sector
SelfKey’s proprietary platform will be a welcome addition to the FinTech industry, particularly because of FinTech’s issues with identity related fraud. Compliance and know your customer (KYC) regulations are often seen as a burden, rather than an item to be harnessed as a competitive edge. FinTech companies can utilize SelfKey’s platform to create sound, cost-effective compliance systems while also attracting business. FinTech companies who implement SelfKey will allow clients to still be in control of their own data–an important selling point for many consumers.
There are a number of FinTech companies that are already building on SelfKey’s remarkable technology–including big name banks like Standard Chartered. These companies are harnessing SelfKey’s power to revolutionize the way they interact with their clients.
One company, a FinTech robo-advisory provider called Malabar A.I., is using SelfKey’s platform to onboard new advisor clients. Because the clients are able to send their advisors “pre-notarized” documents, the advisors can begin their process as soon as they client is on-boarded. By cutting onboarding time and costs, the advisors are able to do their jobs much faster–benefitting both firm and client alike.
As more FinTech companies discover the power of blockchain technology, more firms will realize how important it is to protect consumer data. One way they can do this is by building their compliance systems using SelfKey’s blockchain platform as a foundation. Those interested in SelfKey’s token sale can actually still participate in the private presale. The presale can be accessed via SelfKey’s website.