In the world of money transfer, I am always trying to explain to startups what it would take have a better understanding on transactions data points for cross-border transfers, i.e. visibility in payments. As part of any compliance program, it is extremely important to grasp how much visibility a company has into its transaction.
Furthermore, I’m also curious to know if this visibility (read: data points) are shared with its transaction partners like banks, processors, etc.
If you’re curious to know what are these data-points, have a look at these data points that used in a cross-border money transfer transaction.
So I devised my own way of classifying how much visibility an entity has into a transaction, and to make it easy, I reference them with “D” i.e. dimensions.
They are six classifications (or dimensions) of payments visibility: 1D, 2D, 3D, 4D, 5D and 6D.
|1D / One-Dimension||Just the transaction amount is known. Other than the amount, nothing else is known about the transaction. Was it an aggregate amount? Was it a singular transaction? Was it international or local? Who was the sender? Who was the recipient? Time? Date? Etc. No other information is provided.|
|2D / Two-Dimensions||Sender/Recipient Information is known, we can see from which account the transaction was originating from and the name of the originating institution and into which account the transaction terminates and the name of the terminating institution. Date, time, amount. Other than this, nothing else is known.|
|3D / Three-Dimensions||Same as 2D, with added information (data) that we have a high-resolution picture (image) of the sender + plus a scan of the KYC documented of the sender|
|4D / Four-Dimensions||Same as 3D, with added information (data) that we have a high-resolution picture (image) of the receiver + plus a scan of the KYC documented of the receiver|
|5D / Five-Dimensions||Same as 4D except we have Biometric scan(s) of the Sender (fingerprint at the very minimum, Iris scan, voice print scan, etc.)|
|6D / Six-Dimensions||Same as 5D except we have Biometric scan(s) of the Receiver (fingerprint at the very minimum, Iris scan, voice print scan, etc.)|
Depending on the privacy laws of the countries, the amount of information that can legally be shared is something to consider. As governments and financial regulators put more pressure on banks and money service businesses, the need for more details on person-to-person transfers is increasing. This is especially true for cross-border P2P transfers.
If you look at transfers to countries like Somalia, Mexico, Nigeria, Bangladesh, etc. Western countries are fearful of money transfer channels being used for money laundering &/or terrorist financing
Banks used to be content with 1D/2D payments coming from MSBs / MTOs. These were aggregate payments, bunched together, processed and then forwarded. The only problem was the banks did not have granular visibility into the transactions like MSBs / MTOs did.
This is one of the contributing factors that has led towards the de-risking exercise at banks. Most FIs feel they do not have the necessary controls &/or visibility into the transactions to minimize their risks.
Operators who use high-risk corridors for money transfers are now trying to convince banks on upgrading their system to be able to see beyond 2D. Many MSBs now have the ability to process 4D, 5D and 6D transactions, but the problem lies with the technology infrastructure at banks, which in most cases are not geared to handle transaction data from partners with added details.