<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/10/Surrogates-1.webp" alt="M2P Fintech" title="" width="100%" height="253">If you are in the credit card issuance business, then this is an article you must read.<a class="link" href="https://m2pfintech.com/blog/credit-card-processing-a-definitive-guide/">Credit cards</a> have been a growing industry in India, with 7.36 crore card users. The issuance side is leaping at 19%, and card spending is growing at 48% YoY.3 primary levers that drive credit card growth are as follows.<ul class="list-node" id="cjmc3066q"><li>Current Account Savings Account (CASA) base for Existing to Bank (ETB) issuances</li><li>Co-branded card partnerships</li><li>New to Bank (NTB) issuances through sourcing partners</li></ul><h2 class="heading-node" id="h4y2sbeks" style="text-align: left">Challenges in NTB card issuance</h2>Though the market is moving towards instant credit card issuance, it still takes 3-5 days to provide hard approvals, complete <a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/" target="_blank" rel="noopener">KYC</a>, and disbursal of cards. Instant origination is only possible when the assessment/decision becomes instant across touchpoints like branches, websites, apps, and partners. While this can be possible for issuing credit cards to ETB customers, the real challenge lies in issuing cards to NTB customers. Current origination systems are inadequate to meet the market’s needs.Credit cards require a unique origination system built for <a class="link" href="https://m2pfintech.com/blog/steps-in-credit-underwriting-why-using-an-alternative-source-of-data-and-behavior-metrics-will-be-of-help/" target="_blank" rel="noopener">instant underwriting,</a> on-the-fly policy changes, central catalog management, and managing partnerships from a central point. This system will address the challenges in issuing cards to NTB customers - Instant Underwriting, Instant KYC, and Instant Issuance.<h3 class="heading-node" id="jfhywlxy5" style="text-align: left">What if there is a platform that accelerates instant card issuance?</h3>M2P’s Surrogate Platform is the fastest way for banks to issue credit cards to NTB customers by assessing the first-party data, such as the customer’s <a class="link" href="https://m2pfintech.com/blog/pros-and-cons-of-payroll-cards/" target="_blank" rel="noopener">payroll,</a> existing credit cards (if any), and average quarterly balance through the <a class="link" href="https://m2pfintech.com/blog/account-aggregator-101-democratizing-data-access-and-sharing/" target="_blank" rel="noopener">Account Aggregator framework.</a><h2 class="heading-node" id="m43pr1zsg" style="text-align: left">How does the platform work? (In case of a payroll-based surrogate)</h2><ol class="list-node" id="v31o5850k"><li>The customer enters their personal information on the bank website, and basic bureau checks are done.</li><li>They provide consent to retrieve payroll from HRMS.</li><li>The platform verifies employment, income, and personal information.</li><li>The credit limit and eligible cards approved for the customers are displayed on the website.</li><li>The customer is verified for CKYC, after which the virtual credit card is issued instantly.</li></ol>And all of this happens within 3 minutes.Through this surrogate program, payrolls of over 1.5 crore salaried individuals from Tier-A and Tier-B companies can be sourced easily for card issuance. Beyond payroll, surrogates like the Card-for-Card and AQB are some of the commonly used surrogates.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/10/Surrogates-img1.webp" alt="M2P Fintech" title="" width="100%" height="253"><ul class="list-node" id="liluf9587"><li>Card for Card (C4C) –The C4C surrogate helps banks issue new credit cards based on the customer’s existing credit card. The customer’s card statement is used for assessing their creditworthiness. What’s new with this program is that banks can run customized policies for credit user segments like revolvers, transactors, etc.</li></ul><ul class="list-node" id="5gzb34ztf"><li>Average Quarterly Balance (AQB)– This model reduces friction for uploading documents with the help of the Account Aggregator model to get the AQB information like the nature of the accounts owned, credit &amp; debit transactions in the account, investments made by customers, insurance premium payments, etc. And instantly issue cards based on this information.</li></ul>Depending on the bank policies, more than 20 surrogate programs can be used for issuing cards.The surrogate programs listed above can be suitable for issuing credit cards for all types of customer profiles as follows.<ul class="list-node" id="idrs7ace6"><li>New to Bank (NTB) – Customers with no previous relationship with the bank. These customers can be instantly issued a credit card based on their payroll.</li></ul><ul class="list-node" id="5n5tj4bc0"><li>Existing to Bank (ETB) – Customers who hold an account of any nature with the bank.&nbsp;</li></ul><ul class="list-node" id="kzoxkr562"><li>New to Credit (NTC) – Customers with no credit product.</li></ul><ul class="list-node" id="uzr6tgb0k"><li>Existing to Credit (ETC) – Customers who have availed of any credit product like loans, overdrafts, etc.</li></ul><ul class="list-node" id="xpyvrs7pi"><li>New to Credit Card (NTCC) – Customers who have loans or any credit product but do not have credit cards.</li><li>Existing to Credit Card (ETCC) – Customers who already have credit card(s).The C4C surrogate program will help issuers expand this customer base.</li></ul><h2 class="heading-node" id="f15od0nlm" style="text-align: left">6 reasons why you need a Surrogate Program</h2>Surrogate platforms enable card issuers to expedite credit decisions, increase their customer base and enhance <a class="link" href="https://m2pfintech.com/blog/crack-the-kyc-jigsaw-ease-onboarding-compliance/" target="_blank" rel="noopener">seamless onboarding</a>. By enrolling with the surrogate platform, card issuance not only becomes simple and trustworthy but also super quick (within seconds).Here are 6 key reasons why issuers must leverage M2P’s surrogate platform.<ul class="list-node" id="x08edig6n"><li>Instant card issuance</li></ul>Issue a virtual card in minutes and enable customers to initiate an online transaction right after card issuance.<ul class="list-node" id="myllssvm8"><li>No code BRE</li></ul>Customize the Business Rule Engine (BRE) catering specifically to the target customers, thus resulting in a win-win situation.<ul class="list-node" id="qieiiihr5"><li>Funnel transparency</li></ul>Easy single-point visibility across all touchpoints.<ul class="list-node" id="gal14twhz"><li>Retargeting campaigns</li></ul>Rejected customers can be retargeted via campaign teams.<ul class="list-node" id="wzokl3pbo"><li>Single window for onboarding marketplace partners</li></ul>Completely manage your sourcing partners with the help of this platform so that banks don’t have to spend bandwidth for <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/" target="_blank" rel="noopener">API integrations</a> with partners.<ul class="list-node" id="0fngg5ic7"><li>User experience</li></ul>Provide a seamless experience that requires minimal or no effort on the end customer’s part.Leading banks in selected locations have started adopting our surrogate platform. Do you also want to transform your credit card issuance game?Write to us at <a class="link" href="mailto:business@m2pfintech.com">business@m2pfintech.com</a>.<a class="link" href="https://m2pfintech.com/newsletter/" target="">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/" target="">LinkedIn</a> and <a class="link" href="https://twitter.com/m2pfintech" target="_blank" rel="noopener">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Resolving NTB Credit Card Issuance Challenges

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/10/AML-Banner-01-3.webp" alt="M2P Fintech" title="" width="100%" height="236"> Money laundering costs the world nearly 5% of its GDP. The losses are estimated to be over $2 trillion per year.&nbsp;&nbsp;For starters, money laundering is not some harmless misdemeanor. It’s a serious financial crime with significant economic and social consequences. As 90% of money laundered is off the radar, criminals and terrorist financiers find it very easy to fund and monetize illegal activities.&nbsp;<h2 class="heading-node" id="2opmmtuxc">What is money laundering?</h2>Money laundering is an illegal process that conceals the origin of ill-gotten funds and makes them appear as if they are from a legitimate source.&nbsp;&nbsp;Here’s an example.    &nbsp;A could have gotten paid for organized criminal activities such as drug trafficking, corruption, embezzlement, or gambling. Now, to spend the gains without drawing attention, A uses shell corporations, high-cash businesses, and other naive financial companies to illegally clean the dirty money and let it out in circulation. Now money laundering doesn’t affect just a particular set of businesses. Its dystopian effect surpasses industries and nationalities.&nbsp;<h2 class="heading-node" id="c9ru60ga0">How does&nbsp;money laundering&nbsp;happen?</h2>Money launderers&nbsp;traverse&nbsp;three stages to&nbsp;stealthily&nbsp;release&nbsp;illicit funds into the financial ecosystem.&nbsp;<h3 class="heading-node" id="4qgmrotqs">3 stages of money laundering</h3><h4 class="heading-node" id="qbxu15oy4">1 Placement&nbsp;</h4>Here the laundered funds are shifted from criminal associations to be placed and positioned as a legitimate source. Usual techniques to mask the identity include false&nbsp;invoices,&nbsp;moving money to heavy cash flow businesses, foreign bank accounts, and offshore companies.&nbsp;&nbsp;&nbsp;<h4 class="heading-node" id="atsxwq39d">2 Layering</h4>Otherwise called the ‘structuring phase,’ layering divides a large sum of money into small transactions to cover up money laundering. It blankets the international money movement, making it difficult for law enforcement to track down launderers. Ultimately, the laundered money circulates globally and is exchanged in foreign markets.&nbsp;<h4 class="heading-node" id="wv3wdgeq0">3 Integration</h4>Also called the ‘extraction phase,’ integration is the final stage of money laundering. In this phase, the laundered money returns to the criminals and integrates with the regular financial stream. Masked to be from a legitimate source, criminals can now legally recover their laundered money and use it for any purpose.&nbsp;<h2 class="heading-node" id="0oubbqivk">Need&nbsp;to combat money&nbsp;laundering&nbsp;</h2>The impact of money laundering is severe. It decays financial health, income distribution, and tax revenues, in addition to promoting crime and slowing down economic growth. Institutions specializing in money movement, including banks, NBFCs, and other financial institutions, are more likely to be impacted by money laundering. Hence, they need to be highly vigilant.The September 11 attacks, popularly known as the 9/11 terrorist attack, had an intense effect on money laundering regulations, mainly focused on the banking sector. After this, the Patriot Act was introduced, which offered the US government power to fight against terrorism. It also directed the financial institutions to expand their Anti-Money Laundering (AML) programs and intensify due diligence on foreign bank accounts. Title III strengthened banking rules by improving communication between law enforcement and financial institutions. This resulted in the US enforcing a stricter AML regime, followed by other countries. In India, RBI imposes stringent anti-money laundering regulations. Banks must follow strict customer identification processes for account opening and transaction monitoring. Anything suspicious must be reported immediately to the appropriate authority. Strong Anti-Money Laundering (AML) regulations and compliance are critical in today’s modern landscape, where criminals are getting more sophisticated by the hour. Monitoring, assessing, and reporting vulnerabilities and suspected money laundering is crucial for financial institutions.&nbsp;&nbsp;<h2 class="heading-node" id="wkbd6qylf">What is Anti-Money Laundering?&nbsp;&nbsp;</h2>Anti-Money Laundering (AML) regulations&nbsp;comprise&nbsp;laws nullifying&nbsp;money laundering or any associated fraudulent activities. It saves banks and other financial institutions from terrorism&nbsp;financing,&nbsp;drug rackets, and&nbsp;other organized crimes.  Comprehensive&nbsp;Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations enable&nbsp;financial institutions to comply&nbsp;with legal requirements and report suspicious financial activities.&nbsp;Technology innovation&nbsp;in&nbsp;&nbsp;<a class="link" href="https://m2pfintech.com/blog/how-is-ai-changing-the-financial-industry-top-6-use-cases-in-fintech-and-banking/">Artificial Intelligence (AI)</a>&nbsp;and Machine Learning (ML)&nbsp;prevents&nbsp;fraudulent activities without hindering&nbsp;customer experience. &nbsp;<h2 class="heading-node" id="3i7d0d4gq">4 Pillars of AML  &nbsp;</h2>For efficient anti-money laundering, businesses need to get the following pillars strong. &nbsp;<h3 class="heading-node" id="epyq8nxhc">Know Your Customer   &nbsp;</h3><a class="link" href="https://m2pfintech.com/blog/crack-the-kyc-jigsaw-ease-onboarding-compliance/">Know Your Customer (KYC)</a>&nbsp;is a critical process for financial institutions. It is a legal requirement for AML laws as it establishes and verifies identity, assesses risk factors, and monitors suspicious activities. &nbsp;<a class="link" href="https://m2pfintech.com/blog/know-your-customer-kyc-the-need-for-authentication/">KYC</a>&nbsp;helps banks and financial institutions understand their customers and their financial dealings to serve them better and manage risks prudently. In India, RBI has enunciated KYC guidelines in the context of recommendations made by the Financial Action Task Force (FATF) on AML.  FIs need to get KYC information, not just at the time of opening a new account.  They obtain additional data from time to time in accordance with account conduct or at periodic refresh cycles based on risk categorization.<h3 class="heading-node" id="6ykiuco81">Customer Due Diligence   &nbsp;</h3>Customer Due Diligence (CDD) is the control process where all the relevant information of the customers is collected and processed for any potential terrorist financing risks. CDD helps identify risks and provides a risk assessment to new customers&nbsp;(via online databases), politically exposed persons (PEPs), government records, watchlists, and sanctions screening.  CDD is an essential step in KYC that requires ongoing monitoring of money laundering risks posed by each customer. This&nbsp;<a class="link" href="https://m2pfintech.com/blog/why-is-risk-based-authentication-rba-critical-for-banks/">risk-based approach</a>&nbsp;will conduct a more profound due diligence process for those with higher non-compliance risks by identifying customers added to sanctions and other AML lists.  Customer due diligence detects money laundering techniques that include layering and structuring. Also known as smurfing, that is breaking up a huge sum of money into smaller transactions to evade reporting limits and avoid perusal. <h3 class="heading-node" id="i2h716qd4">Customer and Transaction Screening   &nbsp;</h3> Banks and other financial institutions are the leading players in the financial landscape with broad customer portfolios. They need to monitor and control the money transfers that&nbsp;take place. As transactions involve several other banks and entities, an average-sized bank mediates thousands of daily&nbsp;<a class="link" href="https://m2pfintech.com/blog/tale-of-money-transfers-from-hawala-to-one-click-remittances/">money transfers.</a>&nbsp;So even a minor crime can bring significant consequences and lead to severe administrative collapses, hefty fines, and loss of credibility. Hence screening of all customer deposits and other transactions must be treated seriously.<h3 class="heading-node" id="fabe0ux9m">Suspicious Activity Reporting   &nbsp;</h3> Examining bank records for any unusual behavior or irregularity is a common procedure for law enforcement organizations investigating money laundering. To aid law enforcement in locating perpetrators in the current regulatory framework, thorough records are kept on every single financial transaction. Banks must have an unchangeable audit trail that regulators can rely on. However, it’s also crucial that compliance experts at financial institutions rapidly and effectively examine issues and close them.<h2 class="heading-node" id="gu7wuxkmw">How do you respond to money laundering suspicions?</h2>Simple. Ask the client for more information. Then you can quickly determine if there is any chance of money laundering or not.And remember to tick off this checklist to avoid the risk of money laundering.&nbsp;<h3 class="heading-node" id="jddlhozk9">Tick off the&nbsp;AML checklist&nbsp;</h3>✅&nbsp;Ensure you run a deep check on your new clients. Revisit the purpose of the business partnership and try to understand why they chose your firm. Customer Due Diligence (CDD) helps in identifying the clients and helps assess/reduce the risk posed by them.&nbsp;&nbsp; ✅&nbsp;Keep track of the unusual transactions that take place at the client’s end.&nbsp;&nbsp;✅&nbsp;Unusual sources of funds are another crucial warning that you must consider. Regulation 28 of the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLR 2017) helps in analyzing transactions if they are processed with the knowledge of the clients. In some cases, asking for any documentary evidence like bank statements, recently filed business accounts, or any documents that confirm the source of funds will help identify any trace of money laundering.&nbsp;&nbsp; ✅&nbsp;Consider the purpose of funds coming from third parties. It may seem like a regular feature, but it may act as criminal property sometimes. So, it is better to run a check on the funds from third parties and their source.✅&nbsp;If there is any change of instructions without prior warning from the client, ask for a reasonable explanation.✅&nbsp;Money launderers are most likely to misuse trust, company formation, operation of a client account, and so on. To avoid these risks, you must comply with anti-money laundering guidance for the legal sector and apply for appropriate levels of CDD and enhanced due diligence before providing these services.✅&nbsp;Pay attention to cash transactions, strictly follow your company’s cash policy, and don’t accept cash payments above the specified limit. There is always a high risk posed by cash.<h2 class="heading-node" id="4nrz33gno">Challenges in implementing AML  &nbsp;</h2>AML compliance is indispensable. But effective implementation is the key challenge for banks and financial institutions.  Increased governance, lack of skilled resources, requisite tools, technology, and in-depth knowledge are a few bottlenecks that impact AML deployments.Let’s take a brief look at some of the challenges below.Increased governance -&nbsp;These financial institutions and banks face difficulties managing cross-border and multi-jurisdictional AML compliance and customer due diligence requirements. The major challenge they face is identifying beneficial ownership and initiating remedial measures to address the prevailing AML gaps uncovered by regulatory reviews.  Lack of skilled personnel -&nbsp;Fetching professional resources with in-depth knowledge of AML is a tough challenge. Other issues include high onboarding timelines and costs, and attrition. With evolving regulatory requirements, organizations must invest considerable time and effort in keeping pace right.Complicated processes and technology -&nbsp;AML compliance requires banks to put in place a multiplicity of processes and technology solutions that will consolidate KYC data and systems in a single repository. They also need to create infrastructure for cross-channel detection of suspicious activities, improve data quality, and standardize data to enable a centralized analysis of fraud and financial crimes. The risk level assigned during onboarding varies according to the transactions undertaken by the customer. Banks must assess the risks dynamically for each customer and change risk levels accordingly to prevent false positives. This necessitates continual transaction monitoring for each customer, which is a daunting task.<h2 class="heading-node" id="9x7kxfrw4">In conclusion&nbsp;</h2>If you are a business looking to combat money laundering, you must invest in a robust AML platform focusing on the four critical aspects.&nbsp; Research and Technology&nbsp;– With state-of-the-art technologies like artificial intelligence, you can detect false positives and conduct in-depth research to eliminate wrongdoings.&nbsp;Constant Communication&nbsp;– Regular communication should be between the parties involved, including law enforcement, government, regulatory bodies, etc. Communication will keep all parties informed, analyze suspicions, and identify possible networks to tackle money launderers.&nbsp;&nbsp;Leverage Data Analytics&nbsp;– Analytics arms you with data and insights to identify and detect patterns concerning money laundering.&nbsp;&nbsp; System Standardization&nbsp;– Proper standardization helps to communicate and process data that hinder fraud detection.&nbsp;&nbsp; Want to know more about AML deployment?&nbsp;Write to us at <a class="link Hyperlink SCXW36320282 BCX8" href="mailto:business@m2pfintech.com" target="_blank" rel="noreferrer noopener">business@m2pfintech.com</a>.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

How to Combat Money Laundering?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/10/Gift-Cards-Blog-01-1.webp" alt="M2P Fintech" title="" width="100%" height="358">Gifts play an important role in creating and nurturing relationships. Right from the historic age, gifts in the form of commodities, gold, silver, and cash were welcomed with great gusto.<h2 class="heading-node" id="8hk25m6sk" style="text-align: justify">Are gift cards better than cash?</h2>Choosing the right gift is always a challenge, even for the most seasoned gifters. That’s why cash evolved as a versatile gifting option. Cash was among the most useful gifts that enabled the receivers to buy anything of their choice. However physical cash gifts were considered impersonal and indifferent, not allowing the receiver to treat the gift as a memorable souvenir. As societies progressed towards a <a class="link" href="https://m2pfintech.com/blog/ready-to-sneak-peek-into-global-cashless-societies/">cashless</a> world, currencies began losing their fancy. Gift cards emerged as a better alternative to cash. It provided a perfect way to gift someone the flexibility and freedom to buy what they want. Today, it’s not just individuals who send gift cards to their loved ones. New-age companies &amp; growing organizations consider gift cards the best way to reward their customers and incentivize their employees. The global gift card market was valued at $619.25 billion in 2019. Experts estimate the market to grow at 16% CAGR and cross over $2,076 billion by 2027.<h2 class="heading-node" id="mc5s8l8zp" style="text-align: justify">What is a gift card?</h2>Gift card is a <a class="link" href="https://m2pfintech.com/blog/prepaid-cards-101-a-definitive-guide-for-growth-and-profitability/">prepaid card</a> that is loaded with a specific amount of money by the issuer. Anyone can issue gift cards by partnering. A gift card works like a <a class="link" href="https://m2pfintech.com/blog/debit-card-issuance-101-all-you-need-to-know/">debit card</a>. The issuer preloads the card with cash, in accordance with the value of the card. The purchaser can use gift cards to make both online and offline purchases. Each gift card has a unique number, a barcode, magnetic stripe, and an encoded chip. That number is "loaded" or activated with the appropriate amount of cash. This is done using the database of the gift card transaction system.<h2 class="heading-node" id="dntnq6gjj" style="text-align: justify">Types of gift cards</h2>There are two types of gift cards. Open-loop – An open-loop gift card can be used at any merchant location that accepts the issuer brand of card. For example, a gift card with the Visa logo can be used for purchases at any store that accepts Visa cards. Closed-loop - Marketed by retail or ecommerce stores, closed-loop gift cards allow the cardholder to purchase anything from the specified seller. For instance, if you buy a gift card from Starbucks or Amazon, you or the receiver would only be able to spend it at that particular store.<h2 class="heading-node" id="5spgga35z" style="text-align: justify">Why are gift cards important for businesses?</h2>Gift cards can be purchased instantly and they directly land in the recipient’s inbox within seconds. They are memorable, convenient, and give total freedom to buy whatever the recipient wants. They can be <a class="link" href="https://m2pfintech.com/blog/payment-cards-design-made-simple-heres-what-you-need-to-know/">designed</a> with personalization to include the person's name, business logo, and even a brief note. All these help boost user experience, brand recall, and loyalty. Something cash gifts can definitely not do. Businesses can leverage gift cards to improve cross-selling opportunities, enhance employee relations and customer relationships, and boost brand equity. Gift cards today transcend marketing. They enable businesses to test products and gain more understanding of the market, and in fact, even serve as an additional revenue grosser (card sales &amp; upselling opportunity).<h2 class="heading-node" id="ugthnn82i" style="text-align: justify">How to accelerate your gift card program?</h2>To create and run a successful gift card program, you'll need a well-thought-out concept and cloud-first technology expertise. Businesses need a powerful API platform to issue scalable gift cards across brands, markets, and currencies. The <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">API</a> platform should allow for quick deployments without contracts, with reasonable pricing, and commission rates. The ability to constantly add new retailers and leverage cutting-edge implementation technology is critical to improving the end-user experience and ensuring a return on investment (ROI) on product development. Partnering with an efficient <a class="link" href="https://m2pfintech.com/blog/why-should-apis-be-your-holy-grail-for-prepaid-card-issuance/">API</a>-led card issuer and program manager is a great way to kickstart your gift card journey. Check if your card issuance and program management partner can deliver on the game-changing pointers below.<ol class="list-node" id="hnyuzbgd3"><li>Customized, form-factor agnostic gift cards issuance</li><li>Cloud-ready services at incredible GTM speed</li><li>End-to-end card processing via own card network interfaces</li><li>Security features embedded with 3D secure technology</li><li>Ability to predefine limits and rewards flexibility</li><li>Offline and online accessibility</li></ol>Looking to issue gift cards? Write to us at&nbsp;<a class="link" href="mailto:business@m2pfintech.com">business@m2pfintech.com</a>&nbsp;to get started!&nbsp; We are happy to help. <a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Accelerating a Cloud-Ready Gift Card Program

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/May-Star-of-Month-Blog.webp" alt="M2P Fintech" title="" width="100%" height="253">It's time for our Star of the Month to shine!This September, we spotlight Karan Modi, Tech Lead as the Star of this Month.Karan is an optimistic techie with a passion for learning and exploring. He began his career in the financial sector from scratch and has grown in leaps and bounds by setting exciting benchmarks.But that's not all. We wanted to know what makes this remarkable M2Peer shine the way he does.So, we got into a candid chat with Karan to uncover his motivations, interests, and his secret winning mantra.Curious to know more? Keep reading then.<h2 class="heading-node" id="g48btrhdr" style="text-align: justify">1. How do you usually start your workday?&nbsp;&nbsp;</h2>Many may think otherwise. But trust me. This is an interesting question.Because the way you start off sets the tone for the rest of the day.Be it a workday or weekend, I always start on a positive note. Then I list my responsibilities and schedule everything for the fantastic day ahead of me.I connect with my team and ensure we navigate the workday as per our plan. But before anything, we quickly grab a cup of steaming coffee.<h2 class="heading-node" id="1vmihoedw" style="text-align: justify">2. What are your main responsibilities as Tech Lead?</h2>As Tech Lead, the first thing I do every day is gather and understand client requirements. Then it's all about teamwork.We collaborate to analyze requirements, sort out challenges and define solutions. Since I handle the payments segment, managing security is my key responsibility.I believe team happiness and motivation are crucial to productivity. So, I interact with my team to resolve issues, if any.<h2 class="heading-node" id="ikensee0d" style="text-align: justify">3. How have you grown through the years as an M2Peer?</h2>I started out as a developer in the BSG family, and it's been a wonderful journey for the past 5 years. I had immense opportunities to explore technologies and grow my skills by setting exciting benchmarks.All thanks to the top-notch people I’ve worked with over the past few years, I was able to learn a lot about the industry, products, technology, and people. Special mentions to my peers for being there for me both personally and professionally. Today, I’m thrilled to be an M2Peer and look forward to greater accomplishments.<h2 class="heading-node" id="we61rho1b" style="text-align: justify">4. Is there a quote/saying that motivates you?&nbsp;&nbsp;</h2>Whenever I feel a bit stressed or low, I tell myself - “Karan, keep calm!”Taking some time off helps me relax. Once I relax and feel rejuvenated, I start working with greater vigor.<h2 class="heading-node" id="r8gw7nepr" style="text-align: justify">5. What's that one thing your colleagues don't know about you?</h2>I loved athletics back in my school days. In fact, I was sports representative for Kho-Kho in Surat.<h2 class="heading-node" id="wd29b1c0p" style="text-align: justify">6. What inspires you the most about your workplace?</h2>People I work with inspire me. Their out-of-box solutioning, work ethics and communication style galvanize me into action. &nbsp;I’m grateful for the amazing learning and growth opportunities M2P offers me.<h2 class="heading-node" id="o95rlrwyy" style="text-align: justify">7. What's your idea of a perfect day?&nbsp;</h2>A perfect day to me entails a healthy work-life balance. I am the happiest when I spend quality time with family and give my fullest to work without any compromise.<h2 class="heading-node" id="p6nwcfgut" style="text-align: justify">8. What was your career path before, and how has it changed?</h2>There was a time when I didn't know anything about finance. Even basic definitions of credit or debit were Greek and Latin to me.But today I’m a seasoned professional in the financial industry. I feel proud to look back and realize how much I have grown in the past few years.I began my career journey in an implementation team for a private company. My growth trajectory skyrocketed from Senior Software Engineer to Tech Lead when I joined BSG. Today we have spread our wings and are soaring with the wonderful M2P family.<h2 class="heading-node" id="l62ixyb0f" style="text-align: justify">9. What are your hobbies/ interests?</h2>I like to spend quality time with my friends and family. I also enjoy playing cricket whenever I find the time. I have recently developed a keen interest in traveling and exploring breath-taking destinations!<h2 class="heading-node" id="om98pkskz" style="text-align: justify">10. Anything else you want to share with your peers?</h2>I'm glad to be working and learning new things among the great minds here! I have learned, improved, and grown in numerous ways here. Grateful to all the remarkable peers I have.Keep rocking, Team M2P! 😊<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Catching up with Karan Modi, our Alpha Geek

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/fixed-deposit.webp" alt="M2P Fintech" title="" width="100%" height="358">Indians save up to 28.2% of their income on average. And 95% of them prefer Fixed Deposits (FDs) as their primary savings option. &nbsp; Maintaining a healthy spending-saving balance has always been a priority in Indian households.&nbsp;Concepts of saving and investing for the rainy day are inculcated in young minds to&nbsp;ensure financial stability, discipline, and freedom. Though there are several investment instruments in the market, Fixed Deposit (FD) rules the heart of the savings-savvy populace in India. As they are not market-linked instruments, FDs are low on financial risk with optimal wealth appreciation potential. So, it’s a safe haven for people to park their funds and earn reasonable interest without market exposure.&nbsp; &nbsp; Are fixed deposits available only in the Indian market? Not exactly. FDs are available in different formats across the world. It is known as a Certificate of Deposit/Term Deposit in the US, Canada, and New Zealand and as Fixed Term Bonds in the UK. While the average interest rate in India is around 5%, it ranges between 0.5% and a maximum of 2% in other countries.&nbsp;<h2 class="heading-node" id="39x2x2wau" style="text-align: justify">Pros and cons of fixed deposits</h2>A fixed deposit has a tenure starting from 7 days and can extend as high as 10 years. Complete safety of capital is ensured in an FD, along with stable returns. As a tax-saving instrument, they deliver long standing benefits that include low risk and flexibility as follows.<ul class="list-node" id="0un3uzcne"><li>Overdraft facilities against FDs to help customers in case of emergencies</li><li>Tax exemption benefits under section 80C of the Income Tax Act, 1961</li><li>Protected up to Rs. 5 lakhs by the DICGC's (Deposit Insurance and Credit Guarantee Corporation) insurance cover</li><li>Assured returns and minimized risks as the rates do not fluctuate often</li></ul>Some banks offer free insurance and health care benefits alongside their FD investment.&nbsp;However, despite all the advantages, FD had a few limitations.&nbsp; Creating a physical FD at the bank required multiple trips to the branch, a lot of paperwork, and a swirl of redirects to complete a single task. These cause great inconvenience to the customer in today's digital age. &nbsp; The limitations mentioned above called for a modernized digital upgrade of FD, the go-to investment choice of multitudes.<h2 class="heading-node" id="sox1aqtor" style="text-align: justify">Rise of digital fixed deposits</h2>With the digitization of finance echoing in every nook of the country, the traditional FD model had to adapt to emerging trends. The pandemic further fueled the shift to modernized digital fixed deposits. People wanted to go about their daily lives as normally as possible without risking their safety. Instant remote onboarding, digital KYC, and personalized customer experiences emerged as factors that determined the success of bank deposits.&nbsp;&nbsp;&nbsp;&nbsp; Banks, NBFCs, and fintechs had to embrace the much-needed digital avatar and modernized their traditional approaches. But it was again not without challenges.&nbsp;Here’s a quick peek into their pain points.<ul class="list-node" id="ey420216x"><li>Conventional banks’ reliance on outdated, monolithic technology hindered customer base scaling, NBFC and fintech interactions, and expansions</li><li>There was no single window for the customers to compare and invest</li><li>The FD process was exhaustive with multiple process integrations, each focusing on only particular stages of the product lifecycle</li></ul>The inefficiencies of legacy platforms impacted the agility, scaling, and profitability potential of&nbsp; FD providers.<h2 class="heading-node" id="09o77ear7" style="text-align: justify">Benefits of digitizing the FD platform</h2>The prospect of saving time, effort, and the cost is something that excites everyone about technological advancement. &nbsp; Digital FD platforms enable that and more. It gives FD providers and customers the convenience of anytime, anywhere investments. It enables customers to compare and contrast various FD products based on parameters like cost, interest rates, etc.&nbsp; With easier access to information on investment choices in one place, investors will develop trust factors and enjoy personalized experiences. Customers can now say goodbye to lengthy procedures and tiresome paperwork, as digital tools help capture onboarding and other information without much manual intervention. All these boosts seamless customer experience immensely.&nbsp; In addition, the digital FD market has the potential to enable a wide array of use cases that range from assisting millennials in getting their financial game running, to enhance the value of investment portfolios for existing customers.&nbsp;&nbsp; <a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a> for more insightful fintech tales curated for curious minds like you.

Modernizing Fixed Deposits, the Digital Way

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/MicrosoftTeams-image-9.webp" alt="M2P Fintech" title="" width="100%" height="253">The world of banking has transformed over the years. Customer experience has now become a key differentiator. Personalization, speed, convenience, and security have evolved as factors that determine profitability.To keep pace with the changing customer expectations and the competitive landscape, banks need to modernize their core banking systems. Only then can they scale technology innovation, upgrade processes, and re-engineer their workforce to deliver mobile-first, personalized customer experiences while reducing cost and complexities.Go beyond the surface and explore more.<ul class="list-node" id="dnjdyenon"><li><a class="link" href="#21">What are Core Banking Systems?</a></li><li><a class="link" href="#11">Evolution of Core Banking Systems</a></li><li><a class="link" href="#31">Turing Core Banking System (CBS)</a></li><li><a class="link" href="#41">What’s New in Core Banking?</a></li><li><a class="link" href="#51">Final Word</a></li></ul><h2 class="heading-node" id="21" style="text-align: left">What are Core Banking Systems?</h2>Centralized Online Real-time Environment (CORE) banking systems serve as the technical infrastructure that enables banks to manage their day-to-day operations efficiently and seamlessly. They facilitate branch agnostic transactions across multiple touchpoints worldwide.Hosted on-premise or in the cloud, core banking provide a singular view of customer data to facilitate information flow and operational excellence across delivery channels. It simplifies services such as new account creation, customer relationship management, transaction processing, loan issuing, and servicing. Banks can achieve greater cost and operational efficiencies by making the big shift from legacy to modern <a class="link" href="https://m2pfintech.com/blog/core-banking-essentials-types-components-advantages/">core banking solutions</a>.<h2 class="heading-node" id="11" style="text-align: left">Evolution of Core Banking Systems</h2>Core banking is not a new phenomenon. It had a humble beginning in the 1970s with rigid codes and basic computerizations and evolved with technological advances, product innovations, and customer requirements to be what it is today.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/Infpgraphic-1.webp" alt="M2P Fintech" title="" width="100%" height="253"><h3 class="heading-node" id="hefhm2ugl" style="text-align: left">1st Generation Core Banking System – Basic Computerization</h3>From 1970 to 1990 CBS began taking root in the banking industry. At its most primal form, the system functioned on basic computerization techniques and was developed in-house by most banks.The 1st gen CBS used monolithic applications that were based on complex codes. The IT costs were quite high, and it offered only a few basic features like transaction execution, record-keeping, and customer data management. Sequential data were stored in silos, and transactions were processed in batches at the end of the day.So, <a class="link" href="https://m2pfintech.com/blog/tale-of-money-transfers-from-hawala-to-one-click-remittances/">money transfers</a> and <a class="link" href="https://m2pfintech.com/blog/future-of-payments-processing-matched-with-industry-needs/">payments</a> could not be processed in real-time. The applications were accessible to users only during counter hours. The system was prone to data loss and was difficult to replace without causing a service disruption.<h3 class="heading-node" id="lk1xsezsg" style="text-align: left">2nd Generation Core Banking System - Product-centric Digital Interface</h3>From 1990 to 2005, CBS was in its product-centric avatar with a penchant for digital interfaces. The infrastructure developments were outsourced to external parties that focused on building a vibrant user interface for 24/7 access to banking services.Software modules and a few subroutines were introduced to improve the flexibility of the code. But, even after several optimization trials, the code remained complex. This made processing large volumes of transactions tougher. And banking data were still organized in silos.Client programs were slowly added even though the standards were still mainframes. Software that was previously accessible through branch networks now became available to customers at ATMs and payment terminals. However, during maintenance, the system still faced prolonged service disruption.<h3 class="heading-node" id="i8wq3v74b" style="text-align: left">3rd Generation Core Banking System - Customer-centric Processes</h3>2010 was the year 3rd generation CBS came into prevalence. It was a major leap from the yesteryear computerizations and product-centric interfaces. CBS became more customer-centric, and banks began building a digital layer to improve flexibility.The first programming interfaces appeared, and the core banking software was accessible on the Internet. The software architecture became less monolithic, and the system started to adapt to newer structures, such as Application Service Providers (ASPs) and Service-Oriented Architectures (SOAs).On the user experience side, newer milestones were achieved, and now version changes could be performed in a shorter span of time. Truly graphic interfaces in HTML and Windows pages were introduced.The infrastructure was completely customer focused. But things started to change when the pandemic struck in 2020. Customer needs, expectations, journeys, and touchpoints underwent a radical transformation.Modern core banking systems came around to save the day. It kickstarted digital transformation in traditional banks and helped new-age banks accelerate next-gen customer experience. API-led core banking architectures enable banks to scale reliable and strong banking ecosystems with frictionless, rapid integrations.<h3 class="heading-node" id="2ndpajyzi" style="text-align: left">4th Generation - Next-gen Core Banking via Platformization</h3>After 2020, 4th generation core banking systems came into prevalence. Platformization of CBS evolved as a crucial development, transforming the core from being only a system to becoming a complete platform.Going beyond traditional models, modern core banking platforms give banks the agility to scale and fully leverage the potential of digital revolution to satisfy stakeholders such as customers, employees, regulators, and partners.&nbsp;However, traditional banks with legacy core banking platforms still grapple with silos, code rigidity, and complexities. Even though their financial processes are automated and newer distribution channels are in place, legacy systems hinder adaptive flexibility to changing customer journeys and behavior, closed ecosystems, and vendor lock-ins. They also result in higher maintenance costs, slower GTM speed, and do not support instant releases.<a class="link" href="https://m2pfintech.com/blog/unlock-the-future-of-banking-with-next-gen-core-banking-solutions/">Next-generation core banking</a> platform breaks down all the barriers that legacy systems impose. They accelerate digital transformation using modern, scalable, and open architectures and lightweight codes. Leveraging APIs and advanced technologies like machine learning, core platforms deliver simplicity, cost efficiency, speed, interoperability, flexibility, security, and future readiness.<h3 class="heading-node" id="c3fg1qz8n" style="text-align: left">Benefits of Next-gen Core Banking Systems</h3><ul class="list-node" id="zkhhkcwra"><li>Simplicity in scaling up</li><li>Agility to accelerate new product launches</li><li>Incredible go-to-market speed</li><li>Onboarding and setting up happen in a few clicks</li><li>Advanced security systems for data storage and fraud prevention</li><li>Centralized access to account aggregators, mobile and third-party applications</li></ul><h2 class="heading-node" id="31" style="text-align: left">Turing Core Banking System (CBS)</h2>Turing Core Banking System (CBS) is a next-gen platform that focuses on customer experience, operational excellence, and security well within the regulatory framework. It is built on the latest micro-services architecture with low code and an <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">API</a>-first, cloud-agnostic platform making it a modern and futuristic core banking system.<h3 class="heading-node" id="lb5majzyt" style="text-align: left">Unique Features of Turing</h3><ul class="list-node" id="mlvnqk619"><li>Incredible Speed of innovation (using <a class="link" href="https://m2pfintech.com/blog/how-is-ai-changing-the-financial-industry-top-6-use-cases-in-fintech-and-banking/">AI and ML</a>)</li><li>Flexibility (low code capabilities)</li><li>Agility (hyper-personalized products)</li><li>Pre-integrated with Fraud Risk Management (FRM) engine</li></ul>Furthermore, the primary vantage point of 4th Generation CBS is its ability to evolve and adapt to emerging trends in the financial industry.&nbsp;<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/Whats-new-in-core-banking.webp" alt="M2P Fintech" title="" width="100%" height="253"><h3 class="heading-node" id="ee2asr4hj" style="text-align: left">Open Banking and APIs&nbsp;&nbsp;</h3><a class="link" href="https://m2pfintech.com/blog/open-banking-a-primer-2/">Open banking</a> and the utilization of APIs are key drivers in the next generation of core banking platforms. APIs empower financial institutions to seamlessly integrate with third-party banking solutions, enhancing their service offerings and expanding their reach within the digital ecosystem. This synergy facilitates innovation and the creation of a comprehensive banking experience.&nbsp;<h3 class="heading-node" id="ezrisfcla" style="text-align: left">AI and Machine Learning&nbsp;</h3>The integration of artificial intelligence (AI) and machine learning revolutionizes core banking software. These technologies provide predictive analytics, bolster fraud detection, and deliver personalized customer experiences. Harnessing the insights from vast data pools, AI and machine learning empower banks to make informed decisions, streamline operations, and foster heightened customer satisfaction.&nbsp;<h3 class="heading-node" id="z6cl9klc2" style="text-align: left">Enhanced Security Protocols&nbsp;</h3>As digital transactions become more common, security remains paramount. Multi-layered security protocols, including biometric authentication, two-factor authentication, and end-to-end encryption, are being woven into the fabric of core banking systems. These measures are crucial in safeguarding sensitive customer data and maintaining trust in an increasingly digital landscape.&nbsp;<h3 class="heading-node" id="muek4aumh" style="text-align: left">User-Centric Design&nbsp;&nbsp;</h3>Modern core banking software centers on user-centric design principles. Intuitive interfaces, personalized dashboards, and mobile responsiveness are integrated to ensure that both bank employees and customers enjoy a seamless and intuitive banking experience.&nbsp;<h3 class="heading-node" id="ivow0e1u7" style="text-align: left">Sustainable Banking&nbsp;</h3>The evolution of core banking goes beyond technological advancements and encompasses sustainability, embracing the principles of <a class="link" href="https://m2pfintech.com/blog/climate-fintech-fintechs-leading-the-green-tech/">green fintech</a>. Core solutions align with global concerns about climate change and social responsibility by integrating features that facilitate green investments and enable carbon footprint tracking.&nbsp;<h3 class="heading-node" id="i4q9dhpvd" style="text-align: left">Integrating Decentralized Finance (DeFi)</h3>Blockchain technology and cryptocurrencies are reshaping the financial system. Some core banking software is now incorporating DeFi integrations, enabling banks to offer services related to crypto trading, lending, and borrowing.&nbsp;<h3 class="heading-node" id="x6n64jqoo" style="text-align: left">Chatbot Interfaces&nbsp;</h3>Voice assistants and chatbots are being integrated into banking systems to provide instant customer support and assist with transactions. Customers can perform banking tasks using natural language, simplifying interactions, and reducing the need for manual assistance.&nbsp;<h2 class="heading-node" id="51" style="text-align: left">Final Word</h2>The future of banking is driven by digital innovation, connectivity, and a steadfast focus on customers. Modernizing the core is no longer a choice, it is a dire requirement for banks to grow with agility, efficiency, and customer-centricity.&nbsp;Want to know more about modernizing your core banking system?Write to us at <a class="link" href="mailto:business@m2pfintech.com">business@m2pfintech.com</a>.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a> for insightful fintech bytes curated for curious minds like you.

Future of Core Banking Systems

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/banner_1_1.webp" alt="M2P Fintech" title="" width="100%" height="253">Reserve Bank of India (RBI) released the latest Digital Lending (DL) guidelines on September 2nd, 2022. This notification confirmed the implementation of the recommendations specified in Annex-1 of the RBI press release**, published a few weeks ago.&nbsp;Before deep diving into these guidelines, let us understand the RBI’s role as a regulator in the Indian economy. &nbsp;<h2 class="heading-node" id="xttnnf4sw">Brief history of RBI</h2>A book by Dr. B. R. Ambedkar sparked the idea of setting up a central banking institution for India. Subsequently, on April 1, 1935, RBI started its operations based on the RBI act of 1934. The act provides the statutory basis for the functioning of the bank. Yet, RBI remained a private institution till it was nationalized in 1949. Since then, RBI has been regulating, moderating, and monitoring the financial aspects of the country’s fiscal and economic position.The primary functions of RBI include the following.<ul class="list-node" id="z3s3llbmp"><li>Monetary Authority – Implementing and monitoring monetary policies</li><li>Currency issuance – Producing, managing, issuing, and exchanging quality currency notes and coins</li><li>Regulator &amp; Financial administrator – License issuance, bank mergers, branch expansion, and liquidity of assets</li><li>Managing foreign exchange – Maintaining Rupee value outside India, managing Indian FOREX reserves, and helping foreign trade payments</li></ul>Other than these, RBI’s role also includes stabilizing India’s financial reserves. They work with players such as financial institutions, regulatory bodies, fintechs, and government agencies to ensure the smooth flow of financial services.&nbsp;To summarize, all private and public banks are monitored by RBI to build trust and safety among their users.&nbsp;In the last eight years, fintechs, online/mobile banking, and other technological advancements have modernized the financial ecosystem worldwide. Digital transformation in financial services is on a rapid growth spurt. And in recent years, digital lending has been a prominent topic in the industry with its share of pros and cons. &nbsp;<h2 class="heading-node" id="ti82051sp">So, what is digital lending?&nbsp;</h2><blockquote class="block-node" id="p26pelwhr">According to RBI reports, Digital Lending (DL) is “A remote and automated lending process, majorly using seamless digital technologies in customer acquisition, credit assessment, loan approval, disbursement, recovery, and associated customer service.”&nbsp;</blockquote>Now that the definition clearly states what constitutes digital lending, let's see who the players are and their roles in the DL realm.&nbsp;<h2 class="heading-node" id="dklhgur4h">Key players in the DL arena</h2><ul class="list-node" id="ibj6ivuxn"><li>Borrower- End customer who is the recipient of the loan amount.</li><li>Lenders- Traditional players include Non-Banking Financial Companies (NBFCs) and Banks. They can be further divided into:<ul class="list-node" id="vt0pd5crw"><li>Balance sheet lenders- Those who have a record of the loan in their books</li><li>Marketplace lenders- Those who connect borrowers and balance sheet lenders</li></ul></li><li>Lending Service Providers (LSPs)- They are the fintechs that carry out one or more of the lender’s activities like acquiring potential borrowers, disbursement, and collection among several others. LSPs could either be in or out of the regulatory purview of the financial regulator.&nbsp;</li><li>Fringe lenders: They are shadow and unlicensed lenders who do not come under the purview of any registered entity. Monitoring these lenders is difficult as they do not have a proper identity trail.&nbsp;</li></ul>The key players listed above contribute to the remarkable growth of the industry.&nbsp;<h2 class="heading-node" id="ir07p6kz3">Steady growth prospects</h2>The pandemic era witnessed phenomenal growth in online transactions. There was a significant rise in digital lending platforms and applications. As a result, applying for and borrowing money from a digital lender got simplified, thus giving rise to thousands of Digital Lending Applications (DLAs).&nbsp;Digital Lending (DL) recorded one of the highest growth in India, from $9bn in 2012 to around $110 bn in 2019. &nbsp;By 2023, the value of the digital lending industry is expected to reach $350 Bn dollars.&nbsp;<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/inner-image_1-copy-2.webp" alt="M2P Fintech" title="" width="100%" height="253">When we talk about DL, First Loss Default Guarantee (FLDG) is the term we hear quite often. It is one of the many triggers of RBI's DL regulation.Let's get a quick glimpse into what FLDG is.<h2 class="heading-node" id="e7ha4q7hp">What is FLDG?</h2>We'll start with a simple example. In trading communities, family businesses are carried on from one generation to the next. When entrepreneurs emerge in these situations, loans are given to them based on the family's credibility. The reason is that if they do not make a payment, the lender can recover it from the borrower’s family.Likewise, in the case of First Loss Default Guarantee (FLDG), whenever a borrower defaults, a third party (fintech, in this case) comes in to compensate the lender. This mechanism is FLDG.&nbsp;Here's how FLDG works.<ul class="list-node" id="9gs2tjgn2"><li>Typically, fintechs partner with financial institutions by proposing to widen their customer base by targeting a particular customer segment</li><li>They zero in on that niche and turn them into leads using different marketing strategies</li><li>NBFCs agree to take on these loans on their books with a threshold of guaranteed interest</li><li>This guaranteed interest will be backed by the FLDG arrangement between the lender (NBFC) and LSP (fintech)</li></ul>Few NBFCs were renting out their licenses through FLDG. This enabled LSPs to build a proxy portfolio which some industry experts claim to be a risk to the lending system.&nbsp;<h2 class="heading-node" id="111xwkfi9">Need for RBI Working Group</h2>While FLDG contributed to the industry's increasing volume, several unregulated entities came into the picture. They exploited customer data and resorted to illicit collection activities. Many borrowers faced serious trouble as they were unaware of the real nature of these entities. An alarming rise in customer complaints resulting from the actions of the unregulated entities placed digital lending on RBI’s radar.&nbsp;To address and streamline the same, RBI set up a Working Group (WG) to understand the risks and set up necessary controls in the DL industry.&nbsp;<h2 class="heading-node" id="fcp9tkbk8">What did the Working Group find out?</h2>On January 13, 2021, RBI set up a WG consisting of thirty-six stakeholders. The purpose was to study the DL industry and its activities in detail and to implement the right regulatory approach.The WG surveyed and studied the industry and presented a report (containing two annexures) to RBI on November 18, 2021.&nbsp;The report’s findings were based on the following pillars.<ul class="list-node" id="motjl864k"><li>Discussions with the stakeholders</li><li>Survey and data analysis</li><li>Review of extant regulatory / Supervisory framework and industry practices</li><li>Review of global practices and literature</li></ul>After considering the recommendations, RBI officially announced the implementation of the DL guidelines on September 2, 2022.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/inner-image_1-copy.webp" alt="M2P Fintech" title="" id="f425sz7ha" width="100%" height="253"><h2 class="heading-node" id="6avlwzuzi">&nbsp;DL guidelines implemented</h2><h3 class="heading-node" id="9x0k6ukoy">Annexure – I</h3>The following recommendations were accepted by RBI for immediate implementation.<h3 class="heading-node" id="xwx0cvy12">Customer Protection</h3><ul class="list-node" id="tsdlck58x"><li>Loan disbursals and payments should be between the borrower’s bank account and the lenders without any third-party pool account involved</li></ul><ul class="list-node" id="r68myhycc"><li>Regulated Entities (REs) should directly pay the fees and charges to the Lending Service Providers (LSPs) instead of charging the borrower directly</li></ul><ul class="list-node" id="29mxi1vhz"><li>Before the execution of the loan contract, the borrower must be given a standard Key Fact Statement (KFS)</li></ul><ul class="list-node" id="23dbqwzho"><li>Contents of KFS – Annual Percentage Rate (APR), Recovery method, Grievance addressal, cooling-off/ look-up period&nbsp;</li></ul><ul class="list-node" id="avc3zqm4a"><li>Any change in credit limit must require the borrower’s explicit consent</li></ul><ul class="list-node" id="ty03qxa1h"><li>Borrowers must be given the option of exiting digital loans during the cooling-off period by paying the principal and the applicable APR without any penalty</li></ul><ul class="list-node" id="mciab4cid"><li>All borrower’s complaints should be resolved by a RE and LSPs engaged nodal grievance redressal officer</li></ul><ul class="list-node" id="hve36i3x7"><li>The borrower can escalate it to the RBI if the complaint is not resolved within 30 days</li></ul><h3 class="heading-node" id="dd7ts6i9g">Technology and Data</h3><ul class="list-node" id="h4tyt70ye"><li>Data collection should be done with the borrowers' explicit consent with audit trails &nbsp;</li><li>DLAs should collect only specific data of the borrowers pertaining to <a class="link" href="https://m2pfintech.com/blog/crack-the-kyc-jigsaw-ease-onboarding-compliance/">Know your Customer (KYC)</a> and onboarding</li><li>Borrowers must be provided with consent to accept, deny, or delete the data collected by the DLAs/LSPs</li></ul><h3 class="heading-node" id="6kpyid9pl">Legal and Regulatory</h3><ul class="list-node" id="27yjfnlrz"><li>Any lending sourced through DLAs (of the RE or the LSP employed by RE) must be disclosed to Credit Information Companies (CICs) by REs</li><li>If REs are using the FLDG model, they shall adhere to the provisions of the <a class="link" href="https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12165">Master Direction – Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021, dated September 24, 2021</a></li></ul><h2 class="heading-node" id="t9hkboftc">WG recommendations accepted in principle</h2><h3 class="heading-node" id="3r58jerkf">Annexure – II</h3>The following recommendations were accepted in principle but require further examination.&nbsp;<h3 class="heading-node" id="tga9u9bap">Customer Protection</h3><ul class="list-node" id="bwn63txc9"><li>Any time a RE or LSP looks at or asks for credit information from a CIC, the borrower will be notified by email or text message&nbsp;</li></ul><h3 class="heading-node" id="nn4390fg9">Technology and Data</h3><ul class="list-node" id="3xoi0979d"><li>Banks will keep an eye on accounts often used from a different or overseas IP address that doesn't match the account holder's KYC profile&nbsp;</li></ul><ul class="list-node" id="nd7vb0o1c"><li>Baseline technology standards to be laid down by RBI primarily include secure application logic and an auditable log for every user action</li><li>REs should ensure that the underwriting algorithms are well-researched and auditable enough to point out discrimination factors&nbsp;</li><li>Artificial Intelligence (AI) used by digital lenders should be ethical and focus on protecting customer interests, security, and privacy</li></ul><h3 class="heading-node" id="28bmw3gy5">Legal and Regulatory Framework</h3><ul class="list-node" id="oktvcvrxo"><li>A Self-Regulatory Organization (SRO) to be set up which will focus on framing a code of conduct for recovery and a model standardized LSP agreement for Balance Sheet Lenders</li></ul><ul class="list-node" id="age2sbmui"><li>While the recommendation concerning FLDG is still under examination, REs must ensure financial products involving third-party compensation for defaulters should comply with the Master Direction – Reserve Bank of India (Securitization of Standard Assets) Directions</li></ul><h2 class="heading-node" id="qu1um5gxv">Conclusion</h2>The latest guidelines emphasize the importance of protecting borrowers by curbing the misuse of digital lending apps. The REs are given time until November 30, 2022, to develop systems and processes that are compliant with the ruling.Undoubtedly, fintech-led digital lending will certainly undergo changes. The larger perspective is to protect the customers and the economy from unscrupulous practices and uphold the trust of the banking system.&nbsp;Reference**: <a class="link" href="https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/DIGITALLENDINGF6A90CA76A9B4B3E84AA0EBD24B307F1.PDF">Annexure 1 of RBI press release</a>Want to know more about digital lending? Write to us at&nbsp;<a class="link au lg" href="mailto:business@m2pfintech.com" target="_blank" rel="noopener ugc nofollow">business@m2pfintech.com</a>.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

RBI’s New Digital Lending Guidelines – Will it be a Game Changer?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/09/MicrosoftTeams-image-133-1.webp" alt="M2P Fintech" title="" width="100%" height="358">Did you know?52 million data breaches were recorded in the 2nd quarter of 2022 alone. And the average cost of a data breach hit an all-time high of $4.35 million this year.Since the pandemic, people’s social and financial lives have gone digital. More than 2.5 quintillion bytes of data are generated every second across categories and channels. Imagine this quantum of information falling into the wrong hands due to compromised login credentials, phishing attacks, and cloud misconfigurations. It could expose consumers and businesses to financial loss, reputational damage, operational disruptions, and legal repercussions.As data is one of the most valuable assets a financial organization can possess, securing the data environment from the risk of cyber threats, data breaches, and other attacks is critical.So how can financial companies secure their data environment?Using ISMS.<h2 class="heading-node" id="ljb3adzqe" style="text-align: justify">How ISMS enables a secure environment?</h2>Financial organizations need a robust Information Security Management System (ISMS) to avoid threats and secure sensitive data. ISO 27001 &amp; ISO 22301 certifications are imperative to ensure data environments are secure without data exfiltration and unauthorized data manipulation. ISMS compliance prevents financial penalties, reputation loss, and legal and regulatory non-compliance.<h2 class="heading-node" id="8nwndysxz" style="text-align: justify">What is ISMS?</h2>ISMS is a framework that improves data security by protecting all forms of information, viz., digital, paper-based, and other cloud devices. It establishes a systematic approach that maintains an organization’s confidentiality, integrity, and availability.<ul class="list-node" id="pogyjzt23"><li>Confidentiality- ensuring the right access control</li><li>Integrity -keeping data complete and accurate at all times</li><li>Availability -making sure data is accessible anytime as required</li></ul>The ISMS framework comprises policies, processes, and controls that protect organization data and increase attack resilience. Businesses can leverage their risk analysis approach to reduce costs associated with adding layers of defense technology that might not always work.<h2 class="heading-node" id="jmwuobn5t" style="text-align: justify">Avert security threats with ISO 27001&nbsp;standard</h2>Security threats apply not just to IT assets. Non-IT data sets are under significant threat too. Financial companies need to be proactive with ISO 27001 compliance to secure all data assets, manage data privacy and integrity and ensure customer confidence.ISO 27001 is a security management standard that helps an organization manage risk factors that may include procedures, policies, and staff training. The international standard ISO/IEC 27001 comprises guidelines jointly established by the International Electrotechnical Commission (IEC) and International Organization for Standardization (ISO).The ISO 27001 standard relies a lot on regular risk assessments. These assessments ensure that the organization is so prepared and secure, that when threats appear, all the appropriate measures are already laid out. The ISO 27001 standard encompasses deep risk assessment processes, information classification, organizational structuring, monitoring and reporting guidelines, information security policies, and access control mechanisms, among other procedures.<h2 class="heading-node" id="q2yipzw0r" style="text-align: justify">Combat disruptions with ISO 22301&nbsp;standard</h2>In case of untoward incidents and natural disasters, there is often little or no time for businesses to prepare a proper response. This leads to disruption between people, processes, networks, and infrastructure.Financial companies need to combat data attacks during unexpected times to stay out of financial loss, secure customer confidence, manage customer loyalty and operate their business smoothly. This is precisely what ISO 22301 solves for. ISO 22301 mitigates risks and helps an organization tide over vulnerabilities.ISO 22301 is a global standard published by the International Organization for Standardization (ISO) for Business Continuity Management Systems (BCMS). This business continuity management standard helps an organization identify threats, respond to them, and recover quickly with the least disruption to their business.<h2 class="heading-node" id="md4logi7j" style="text-align: justify">Top-notch data security, our priority</h2>Certified under ISO 27001 and ISO 22301 standards, we prioritize data environment security to defend against cyber-attacks, data breaches, and other risks. We are accredited to deliver products that are embedded with top-notch security and operational excellence.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Securing Data Environments with ISMS

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/08/Goutham-Arunagiri_May-Star-of-Month.webp" alt="M2P Fintech" title="" width="100%" height="253">As we continued exploring the stories of different stars at M2P, we stumbled upon another one this month. &nbsp;Give it up for the Star of this Month - Goutham Arunagiri, our very own Senior Software Engineer👏&nbsp;Goutham is a very curious person. You can always find him with his peers learning and exploring to widen his horizons. Starting his career as an electrician, Goutham took a turn to become our favorite tech support avenger at M2P. And yes, he has an inspiring story that he's been keeping to himself. &nbsp;Well, we tried to uncover some from our little chit-chat on his career, interests, and inspirations. So read on as we discover more about our inquisitive M2Peer! &nbsp;<h2 class="heading-node" id="5ev5uinth">How would you start your workday?&nbsp;</h2>First off, I want to thank you all for this wonderful recognition.&nbsp;&nbsp;Coming back to the question, I love starting my workday with heaps of positivity in it. Usually, I go in a placid mode and maintain a calm mindset, ready to embrace the learning every day has to offer. &nbsp;Be it fun or stress, I grab it wholeheartedly and just accept it.&nbsp;&nbsp;That's how it is, my little secret to surviving stressful days, hahaha😊.&nbsp;<h2 class="heading-node" id="suf7g4trd">Can you describe your responsibilities as a Senior Software Engineer?&nbsp;</h2>First and foremost, I need to ensure that the client faces no issues. In case of any technical or server issues, we resolve them at the earliest.&nbsp;The goal is to have ZERO issues at all times. That's my primary responsibility. In addition, I also handle ad hoc requirements.&nbsp;&nbsp;&nbsp;Every day, I challenge myself to identify client issues and enable a smooth and happy transaction journey for them.&nbsp;&nbsp;<h2 class="heading-node" id="pwh7vfbp5">What was your career path before joining M2P, and how has it changed?&nbsp;&nbsp;</h2>As a fresher, I was unsure of my career direction. But, ever since joining the M2P family, my life changed. Learning, exploring, and growing are now my way of life.&nbsp;From being an electrician initially, to learning about Ops and thriving in Tech Support, it is one heck of a journey. &nbsp;<h2 class="heading-node" id="fqvg746ax">How have you grown through the years as an M2Peer?&nbsp;&nbsp;&nbsp;&nbsp;</h2>FOUR YEARS ALREADY! Time really flew.&nbsp;All I can look back to is a lot of learning, growth, and fun. &nbsp;As I said earlier, I was a complete fresher with zero knowledge about the payments industry. My journey started out as an Operational Engineer at M2P, where I initially used to sit with people and observe how things are handled.&nbsp;&nbsp;Thanking my pals and mentors, Preethi Parthasarathy and Vasantha Kumar Jayachandran, for helping me grasp the nuances of the payments industry.&nbsp;I was always curious about Tech Support and wanted to give it a try. When I was fully ready, Muthu and Prabhu gave me the opportunity to move to Tech Support. And here I am, growing my wings at M2P.&nbsp;&nbsp;<h2 class="heading-node" id="s6yqfsxb3">Is there a quote/saying that motivates you?&nbsp;&nbsp;&nbsp;&nbsp;</h2>Yes. There is one.&nbsp;&nbsp;I like telling myself, "Let's face it" (in Tamil, 'PATHUKALAM'). It motivates me to accept anything I'm facing and helps me to get over it.&nbsp;&nbsp;<h2 class="heading-node" id="4475fnppa">What's that one thing your colleagues don't know about you?&nbsp;&nbsp;</h2>Well, surely most of them won't know that I was an electrician. That's how it all started.&nbsp;&nbsp;And I'm also a little chef of my own, who is especially fond of cooking non-vegetarian dishes. &nbsp;<h2 class="heading-node" id="zo6f1iarm">What inspires you the most about M2P?&nbsp;&nbsp;</h2>Wow. There is a lot that inspires me here. Thanks for asking that.&nbsp;&nbsp;Well, can I reveal the secret? It is the PEOPLE, my fellow M2Peers!&nbsp;&nbsp;People are so kind, knowledgeable, and helpful here. Most of my learning outcomes are from the amazing peers I have. &nbsp;Nobody says NO to new learnings! Well, this might be a little confusing, but people will never say no to my questions. They answered them all. For beginners, this is the dream to learn, explore and understand the industry.&nbsp;&nbsp;<h2 class="heading-node" id="8cn1imi1v">What's your idea of a perfect day?&nbsp;&nbsp;&nbsp;&nbsp;</h2>There isn't one. The mantra is to face and resolve every issue in tech support.&nbsp;&nbsp;But wait. There is actually something that could make our days a little more perfect.&nbsp;&nbsp;That's an appreciation from our client.&nbsp;&nbsp;<h2 class="heading-node" id="tv09a0zhf">What are your hobbies/ interests?&nbsp;&nbsp;</h2>I love to travel. And most of the time, I am very fascinated by movies. So watching them on the First Day, First Show (FDFS) makes me feel amazing.&nbsp;&nbsp;&nbsp;I also love playing cricket, indoor games, and spending quality time with friends and family.<h2 class="heading-node" id="5ts8x5dpv">Anything else you want to share about M2P?&nbsp;</h2>M2P is a great place to learn, and it brings out the best in you! There is a lot to learn, share and explore here.&nbsp;&nbsp;A huge shoutout to all the M2Peers out there. Keep rocking you all!&nbsp;&nbsp;&nbsp;Everybody starts from scratch, and everyone has a different story to share!&nbsp;Stay tuned until we are back with an amazing story of another M2Peer next month!<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.