Is the End of Self-Deposits the Beginning of Automated Account Onboarding?

by Ron Finberg
  • Automated account verification software streamlines the customer onboarding process. This comes at a good time with KYC rules becoming tougher.
Is the End of Self-Deposits the Beginning of Automated Account Onboarding?
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Nothing kills the account opening process for forex and binary options brokers like customer verification requirements. Especially for new traders when opening a trading account it may be a spontaneous decision after clicking on an ad and seeing an enticing landing page, any friction in their ability to deposit and start trading can increase the abandonment rate. Self-deposits are a solution of sorts.

Self-deposits is the industry term whereby a customer deposits and begins to trade before their account is fully approved by a broker’s compliance team. Due to Know Your Customer (KYC) ) and Anti-Money Laundering (AML) requirements, brokers place maximum thresholds for self-deposits, as well as, on requirement customer identification documents submitted to authorize withdrawals. In addition, due to chargebacks on credit cards, even unregulated brokers will typically impose some sort of limit on self-deposits before proper documents are sent.

Plus500 and Compliance

While some firms continue to offer self-deposits, among regulated brokers, the process is slowly being phased out. Triggering changes in regards to customer onboarding practices has been the recent problem faced by Plus500 in their UK unit. Owing to additional compliance checks, Plus500 was forced to freeze a large portion of its trader’s accounts until they send proper documentation.

Speaking to broker sources competing with Plus500, they mentioned to Finance Magnates that the FCA investigations into Plus500’s onboarding procedures is a matter being closely followed. Even though these firms haven't permitted self-deposits or clients to be able to trade without fulfilling KYC requirements, there is a worry that the FCA may enact stricter compliance measures as a result of its investigation into Plus500.

In connection to Plus500, Markets.com announced to their partners that there may be delays in the account onboard process due to adjusting their “registration process to the highest regulatory standards." Included in this process is the requirement of customer verification before they are allowed to start trading. The broker has also stated that this restriction will be “implemented industry wide in the next few months."

A Better Way? Automated Compliance

One solution that is beginning to gain traction in the forex industry, and could ultimately be used to speed up the account opening process, is automated compliance in relation to reviewing documents. Using machine reading technology, companies are now able to convert document images into text, as well as scan IDs for verification. In areas such as the financial industry where KYC is required, machine reading technology is beginning to review customer documents manually.

Also in the making is more advanced document collection formats. While in the past, customers were typically limited to scanning, or G-d forbid faxing documents, some brokers have begun to integrate simpler collection types. These include smartphone trading apps with the ability to snap a picture of documents, having them automatically sent to the broker. Also, current technology now allows users to place their documents in front of their web-cam, while scanning it in real- time, only taking a picture when the documents are held correctly.

When customers are placing an online order, they want it to happen fast, and only in a few seconds - Ron Atzmon

In terms of account openings, the ability for users to upload documents faster, as well as have them reviewed by a computer, can greatly reduce the barriers involved with account opening. On this subject, Ron Atzmon, Managing Director at AU10TIX, whose firm provides automatic document review solutions, explained to Finance Magnates, “When customers are placing an online order, they want it to happen fast, and only in a few seconds." Therefore, he explained that the above mentioned applies to all online account openings, and companies which are looking for the ability to “instantly onboard customers."

Atzmon added that the demand for automated onboarding technology is taking place in many consumer facing sectors of the financial industry, over and above forex or binary options trading. Other sectors that are adopting the technology include P2P lending, gaming, and the cross-border Payments sector. Atzmon mentioned that specifically in the payments sector, there is a growing need for instant onboarding as customers expect their transactions to take place quickly.

While automated solutions provide efficiencies, this does not yet mean that brokers can get dispose of their compliance departments. According to Atzmon, about 80% of customer document reviews can be automated, with the remaining 20% requiring manual review. However, Atzmon added that even with that 20%, automated systems provide benefits to the manual review, as they can offer explanations as to why documents are flagged as appearing fake or of a low quality image.

Nothing kills the account opening process for forex and binary options brokers like customer verification requirements. Especially for new traders when opening a trading account it may be a spontaneous decision after clicking on an ad and seeing an enticing landing page, any friction in their ability to deposit and start trading can increase the abandonment rate. Self-deposits are a solution of sorts.

Self-deposits is the industry term whereby a customer deposits and begins to trade before their account is fully approved by a broker’s compliance team. Due to Know Your Customer (KYC) ) and Anti-Money Laundering (AML) requirements, brokers place maximum thresholds for self-deposits, as well as, on requirement customer identification documents submitted to authorize withdrawals. In addition, due to chargebacks on credit cards, even unregulated brokers will typically impose some sort of limit on self-deposits before proper documents are sent.

Plus500 and Compliance

While some firms continue to offer self-deposits, among regulated brokers, the process is slowly being phased out. Triggering changes in regards to customer onboarding practices has been the recent problem faced by Plus500 in their UK unit. Owing to additional compliance checks, Plus500 was forced to freeze a large portion of its trader’s accounts until they send proper documentation.

Speaking to broker sources competing with Plus500, they mentioned to Finance Magnates that the FCA investigations into Plus500’s onboarding procedures is a matter being closely followed. Even though these firms haven't permitted self-deposits or clients to be able to trade without fulfilling KYC requirements, there is a worry that the FCA may enact stricter compliance measures as a result of its investigation into Plus500.

In connection to Plus500, Markets.com announced to their partners that there may be delays in the account onboard process due to adjusting their “registration process to the highest regulatory standards." Included in this process is the requirement of customer verification before they are allowed to start trading. The broker has also stated that this restriction will be “implemented industry wide in the next few months."

A Better Way? Automated Compliance

One solution that is beginning to gain traction in the forex industry, and could ultimately be used to speed up the account opening process, is automated compliance in relation to reviewing documents. Using machine reading technology, companies are now able to convert document images into text, as well as scan IDs for verification. In areas such as the financial industry where KYC is required, machine reading technology is beginning to review customer documents manually.

Also in the making is more advanced document collection formats. While in the past, customers were typically limited to scanning, or G-d forbid faxing documents, some brokers have begun to integrate simpler collection types. These include smartphone trading apps with the ability to snap a picture of documents, having them automatically sent to the broker. Also, current technology now allows users to place their documents in front of their web-cam, while scanning it in real- time, only taking a picture when the documents are held correctly.

When customers are placing an online order, they want it to happen fast, and only in a few seconds - Ron Atzmon

In terms of account openings, the ability for users to upload documents faster, as well as have them reviewed by a computer, can greatly reduce the barriers involved with account opening. On this subject, Ron Atzmon, Managing Director at AU10TIX, whose firm provides automatic document review solutions, explained to Finance Magnates, “When customers are placing an online order, they want it to happen fast, and only in a few seconds." Therefore, he explained that the above mentioned applies to all online account openings, and companies which are looking for the ability to “instantly onboard customers."

Atzmon added that the demand for automated onboarding technology is taking place in many consumer facing sectors of the financial industry, over and above forex or binary options trading. Other sectors that are adopting the technology include P2P lending, gaming, and the cross-border Payments sector. Atzmon mentioned that specifically in the payments sector, there is a growing need for instant onboarding as customers expect their transactions to take place quickly.

While automated solutions provide efficiencies, this does not yet mean that brokers can get dispose of their compliance departments. According to Atzmon, about 80% of customer document reviews can be automated, with the remaining 20% requiring manual review. However, Atzmon added that even with that 20%, automated systems provide benefits to the manual review, as they can offer explanations as to why documents are flagged as appearing fake or of a low quality image.

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