"Every time someone in the world transfers money to someone else, the entity via which the transfer is performed is legally obligated to check the name of the person initiating the transaction and the name of the receiving bank, and to search for them on the list of international sanctions that exists to combat money laundering. For the transfer to be executed immediately, this process must be both quick and precise", says Gideon (Gidi) Drori who, together with Oleg Golobrodsky, founded FinCom.Co.
"However, there is a problem: Almost every name has several different spellings. For example, my name is Gideon, but everyone knows me as Gidi. In English this transliterates as "Gidi" but when you hear a name and want to write it in English, everyone uses the letters that suit his/her native language. The result is that a British person will spell it Giddy while someone from the Netherlands will write Gidie. Even with my short four-letter name, there are at least three different spellings. The most common name in the world is Muhammed which has no less than 56 different ways of writing it in English...
In the case of money transfers, this becomes a serious problem: how will someone transferring money who checks the blacklist, know what to look for? Three or four options that are defined as "maybe" or possible results may arise.
The problem with "maybe" results is that instead of the money being transferred immediately, everything is stopped to check all the different possible results after which further authorization of the manager is required. That means that the transfer may be delayed for 1-2 days and, sometimes, even a month. The entire process is expensive for the banks, costs that are ultimately imposed on the consumers.
The system created by FinCom.Co resolves the problem of the different spelling. According to the company, it is the only system in the world that can search for a person's name in 38 different languages. This is done while transforming each name into its phonetic form, thereby creating a "phonetic fingerprint" – a numerical structure that represents the person's name.
"With this numerical structure we can also examine addresses, dates of birth, emails, and other information that allows us, with the "phonetic fingerprint" and two additional reference points of information, statistical accuracy of one in seven billion", Drori explains.
"This method also assists with preservation of privacy because information systems can be based on phonetic codes instead of people's real names. Because our system operates on 38 different languages. When there are no other points of intersection, the number of possibilities is huge", says Drori.
Tests that the company conducted in insurance companies, financial institutions, and the world's leading banks revealed a decline in inaccuracies of more than 60%, alongside 'misses' of more than 10% i.e., times when the criminals received the money. "This is where our technological advantage comes to the fore", clarifies Drori. "We already have a patent approved in the US and several more on the way. This is the reason we were chosen as one of the world's 100 leading technology companies (RegTech100) in the area of regulation while we are still a small company, and the rest are giant corporations".
90% Less Mistakes
"The world of fintech is not just about how I transfer money to you but also, how I prevent fraud, how I monitor transactions, how I provide better customer service, how I allow you to do things via your cellphone, and also, how I advance procedures to make things happen quicker", Drori explains. "We are considered a sub-sector of fintech called reg-tech i.e., technologies that support regulation – the regulation here relates to the field of money laundering.
"For example, there is an entire world called 'real time payments' – instantaneous money transfers. What is the problem? The technological systems that perform these transfers already exist, but they lack compliance systems, and the transfers therefore take time. We are capable of extracting names from a list of 100 million names in less than 1 second. All other systems worldwide take at least 15 seconds to complete the same procedure.
"We have also succeeded in making the scanning process much more precise. We are currently engaged in processes with five of the world's ten largest banks. We have no intention of changing their system but rather, want to suggest that they retain the existing system which we will then use, but do so while reducing its errors by 90% and costs, enabling to save millions every year", Drori says.
"New regulation is introduced all the time", he adds. "Now, as a bank, I need to not only check your name against blacklists but also to take the name of the beneficiary and check whether the person I am transferring money to is really the owner of the account. This is something that, unexpectedly, was just not done until now. Transfers were simply made between two numbers, and this enabled a lot of fraud. Banks are now obligated to perform these procedures. The ability to crosscheck names accurately and efficiently is exactly what we are best in the world at".
The Innovation Authority Provided Us Breathing Space
FinCom.Co was founded three years ago. The company began to operate as a group in September 2017 and raised its first round of seed funding in February 2018. Today, the company is engaged in raising the next stage of funding that will enable it to develop further and is participating in the Innovation Authority's 'Fast Track Program'.
"This past year was terrible", Drori claims. "Personally, I think that the high-tech sector has been badly damaged. We are yet to feel a lot of the impact – the complacency, the gaps between high-tech and industry are significantly greater and unstable, and there are many problems that are yet to surface".
In this context, Drori speaks favorably of the Innovation Authority that intervened with exceptional vision, attentiveness, and desire to support the crucially important high-tech sector. "During the past year, the Authority provided us with the breathing space that saved the company. We received an offer to purchase the company, but it is still too early. The Innovation Authority gives significant support to local industry".
According to Drori, the company is currently on the way to realizing its vision: there are extremely large companies in the market with which we are presently engaged in a process of assimilating our product in their systems that are used by various banks around the world. "Leading companies in this market of name scanning – supposedly our competitors – have already approached us to propose that they assimilate our technology with the aim of advancing the entire market instead of competing with one another. Thanks to the proposed collaboration, we will generate return for our investors and move on to other markets", he explains.
"One of the biggest markets is, of course, the world of CRM – customer relationship management. For example, Israeli companies have a list of customers in English and a list in Hebrew and are faced with the challenge of how to reconcile them, or they may have a list of customers in an old format and are now transitioning to a new format. How can two systems be reconciled? This is exactly where we come in", says Drori. "We want to connect languages, different forms of spelling, and the imprecise structure of these information systems.
"We perform a search, map and connect the information systems more efficiently than the existing solutions. We intend to enter the world of CRM and to provide a structured solution for the field of data import to information systems".
The company collaborates closely with Microsoft as well as other large corporations such as one of the world's five leading companies – Capgemini – and other giant companies.
"It's Difficult to Steal Someone's Face"
To verify identity in a digital world is not a simple challenge", says Amir Fishman CEO of Scanovate. "To be able to rely on a verification process in order to create an immediate business transaction is already the next level. There is a difference between verifying identity and giving someone a loan after checking him for five years and verifying a person's identity and giving him a loan a second later". The world is progressing to the second level that requires more precise technologies. There is a constant struggle for balance between the levels of precision and the customer's experience.
The digital world is constantly developing. If someone knows your ID number, tomorrow he can steal your identity because nobody knows who is really sitting at the keyboard entering the ID number. "Even telephone numbers can be duplicated", Fishman says. "But facial contours are much more difficult to steal. Facial contours identify people unequivocally. As methods of identity theft become more advanced and as cyber capabilities improve, the related security requirements become more stringent.
"When I want to open an account online, there is no prior acquaintance between me and the entity I am opening an account with. The bank doesn't know that I'm Amir Fishman – it needs to verify my identity", Fishman explains. "In the past, I would go to the bank and the clerk there would verify my identity physically. This is a very expensive process.
The goal is to rely on technologies to enable a person to verify his own identity from home". When there is no prior acquaintance, I need to check an ID certificate, verify that it is genuine, attribute it to the prospective client, check that the client is a real live person and is not using someone else's picture. The picture of the living person must then be linked to the ID certificate by crosschecking his face with the picture on the certificate", Fishman explains. "In the end, there are also cases where a person comes and says: 'it's not me' and then all these stages of the process need to conform to standards of laws of evidence. There are multiple complexities that need to be resolved along the way to ultimately create an identification process that takes several seconds".
Scanovate's goal is to create comprehensive digital infrastructures for the clients and to enable them to manage the field of identity management and to conform with regulation in a business environment that is becoming increasingly digital, certainly in the post-Covid world.
"If we look for a moment at the needs", Fishman says, "first, there is the need of financial institutions or commercial companies seeking to become more digital. If you can't provide a digital interface the client can rely on, you don't have a place in the market. On the other hand, are the end customers – usually a wide range of ages from different sectors of the population – whom you must assume have zero tolerance for digital processes, so the solutions need to be very flexible and suited to the target population. There is also the constantly changing regulation which is becoming increasingly stringent".
This situation means that the processes become more complex, the level of interaction with the client increases, and the system is obligated to conform to regulation. "In addition, as a company, you want to have full control over all the elements that need harnessing to commercial processes", Fishman says. "For example, we are required to support the ability to immediately question the client, to request and gather documents, to fill in and sign on documents, to identify the client with numerous biometric technologies, and to communicate with the client via WhatsApp, SMS, and email in Android and ios environments. To meet all these requirements, you must have a single environment where you manage all the different scenarios. Our system is capable of doing that".
Scanovate was founded in 2011 and, until 2014, operated in other worlds of image processing. "In 2014, we made a complete switch over to the field of fintech", says Fishman. "We completed an accelerator program, studied the financial world, and received a first opportunity at Bank Leumi to start with check deposits. This was our point of entry to the field of identity management".
The company developed a facial identity technology that extracts text from a picture – OCR (Optical Character Recognition), facial verification, reading fingerprints, a one-time password (OTP), biometric signature and more. "We designed many of these things ourselves", says Fishman. "In early 2019, we began to develop a platform called B-Trust which is what presently manages all the processes and allows our clients to manage all forms of identity management i.e., everything related to scanning and storing documents, checks, certificates etc.
"We are unique in this challenging field of identity verification, primarily because we develop our technologies ourselves. We are not an integrator of different kinds of solutions, but rather, are really a factory of biometric technologies".
Another challenging issue is the fact that these same platforms must be able to take any identity and add elements to it that primarily deal with worlds of regulation – all sorts of processes of repeat identification, patient identification, logging on to personal areas etc. "This can all be managed in an organization with ten systems and needs to all operate harmoniously", Fishman explains. Therefore, a platform is needed to support all these processes. We have achieved all this, and the company can now support dozens of scenarios in most of the existing industries".
Technological Innovation or Product Maturity?
In Israel, Scanovate operates in conjunction with Altshuler-Shaham Investment Bank, together with the Innovation Authority and the Capital Market Authority that finance and lead the process". The vision for the future is to create a situation whereby we enable all investment companies in Israel to identify their clients in a way that replaces physical identification", explains Fishman.
"At present, we are building this process to conform with all the regulations and with all Altshuler Shaham's customer service standards as a market leader. There is a kind of struggle between the need to create a customer experience of Altshuler standards and the regulator who wants to strengthen the process as much as possible. Ultimately, a middle path must be found that will achieve and optimal balance. We are fortunate to have discovered such good partners at Altshuler Shaham.
The Pilots Program, in which Scanovate is participating, is a program aimed at advancing fintech companies' activity in Israel together with the Israel Securities Authority and the Innovation Authority. "The program's early stages were very challenging", says Fishman, "because there was tension between the Innovation Authority that pushed for maximum technological innovation, and the Israel Securities Authority that primarily wanted initial product maturity.
"We overcame this challenge, in large degree by virtue of the patience of the Innovation Authority's professional expert and his ability to demonstrate flexibility and, also, that of the Capital Market Authority that successfully convinced us of the need for balance between the two things. We are extremely satisfied with the process we have undergone, because it brings not just innovation but also a real product that is intended to serve specific target audiences. The Capital market's goal is to facilitate competition between the investment companies and to enable the customer to open a complete digital account. A critical part of this is the unequivocal identification of the customer.
"Covid did two things: On the one hand, many financial customers went on the defensive, not a good thing for anyone. On the other hand, the number of opportunities grew dramatically. Our approach of first becoming well established in Israel and only then diversifying to other markets proved itself. Despite everything that happened, our clients in Israel took on all kinds of challenges in the digital worlds. If in the past we needed to explain why they needed us, today it is the client who is pursuing us.
"We aim to provide a comprehensive solution in the world of identity and compliance, and to be a world leader in this market. We want our clients to receive a platform with a complete set of tools from beginning to end that supports every business process which involves the need to communicate with clients in the digital dimension, to solve the problem of identifying them, to support regulation, and to manage a single interface in those organizations. These are challenges of the huge global corporations – and that is where we are heading".
Sagi Dagan, VP and Head of the Growth Division at the Innovation Authority: Covid has delayed many business processes. Have you received a mortgage recently from a commercial entity that did not know you personally prior to Covid? Probably not. Today, when someone tries to digitally open an account, even the largest and most well-known banks refuse to dispense with face-to-face meeting with a company representative. We are here to help you – financial institutions and end customers – to realize your dreams, to expedite processes, and to make the market more efficient by supporting technology companies that are developing innovative technological fintech solutions.