The world is in geopolitical upheaval. Russia’s invasion of Ukraine has displaced millions of people and threatens global food security. Elsewhere, refugees have fled Syria for their lives to Sudan, on perilous journeys to safety or asylum.
In such circumstances, people quickly leave their homes, often without valid passports or other identification documents. This can quickly lead to short-term financial exclusion. To mitigate this, fintech companies are looking for ways to ensure people can access the information they need to quickly rebuild their lives.
Kateryna Danylchenko is CEO of the International Bureau of Credit History (IBCH) and has experienced both sides of this difficult situation. Since the arrival of the war in Ukraine, it has closed its offices, evacuated the staff and took refuge in France.
She says: “With limited or no documentation and no access to certain bank accounts, refugees and migrants often faced a brick wall when trying to find employment, accommodation or make payments in their host country.
“Since the start of the conflict in Ukraine, the rapid progress in fintech over the past few years has allowed me to continue to access basic financial services, whether it’s opening an account in an alternative digital bank , to send money to family and friends, to book temporary accommodation, or to be able to identify myself to landlords.
Fintech solutions have also allowed Danylchenko to top up her cellphone account so she can communicate with friends and family. It also meant she could buy plane tickets for a woman and her daughter, whom she had met in a Kyiv shelter, allowing them to move to Madrid.
But given that IBCH is a Ukrainian subsidiary of fintech company Creditinfo, a credit rating agency focused on mining alternative data in emerging markets, Danylchenko also sees firsthand how it can be used by fintech companies. to help refugees when a big challenge remains identity authentication.
Creditinfo works with central banks, international monetary organizations, banks and other financial institutions to enable refugees in Poland, Moldova and the Baltics to access credit reports that replace this identity information.
Danylchenko says fintech initiatives will continue to play an important role in Ukraine – and beyond – in facilitating access to basic financial services for refugees. But she argues that while developments such as open banking and open finance have offered better connectivity within regions, financial services and transactions are increasingly international in nature.
Danylchenko says fintech companies are well positioned to provide better cross-border compatibility, but she warns this will only happen if governments and central banks follow the potential and do more to provide international bridges.
“The war in Ukraine has highlighted how cross-border financial connectivity is not as strong as it could or should be,” she adds. “If a country is excluded from a global payment infrastructure or if you know that your customer data (KYC) and credit history cannot be shared across borders, it is often people fleeing war who have difficulties in accessing funding during their resettlement”.
Mikkel Velin, co-CEO of integrated finance provider YouLend, also sees KYC as a big deal, given strict identification requirements that can exclude refugees from mortgages and business finance. Fintech, he suggests, offers an answer by focusing on more streams of data that can be analyzed much faster.
“The main problem is discrimination and misunderstanding – perhaps unconscious – regarding the data needed in the 21st century to determine whether someone is eligible to access certain products and services,” he says. “Broader data sources and an open banking system can allow banks and lenders to make more concrete risk assessments.”
Elsewhere, other companies are solving different problems. For example, cheqd provides a technology that allows people to take control and ownership of their data, known as self-sovereign identity (SSI) or decentralized identity. A similar SSI solution was previously piloted by Tykn – now a cheqd partner – enabling the Turkish government to optimize and speed up the issuance of work permits to refugees and then store validated documents in a digital wallet.
Another critical area that fintech companies need to consider in the event of a conflict is the enforcement of global financial sanctions, such as those imposed on Russia. Many fintech solutions are being deployed to prevent fraud in this area, with start-up SEON recently raising $94m (£77m) in funding for this purpose. The war in Ukraine is now driving demand for anti-fraud solutions to counter sanctions evasion by politically exposed persons.
SEON CEO Tamas Kadar discusses how machine learning is democratizing fraud prevention and detection, enabling the fintech to ensure stringent measures enable compliance with current sanctions.
“Fintech companies can do their part to help cut off some of the resources that are going back into the hands of unsavory players,” he explains. “Without careful management, fintech companies could soon find themselves used to circumvent these sanctions.
“Without the right strategies and technologies in place, such solutions have the potential to be exploited. The fallout would not only affect individual fintech companies, but could lead to the industry being viewed in a negative light by some.
Gabriel Hopkins, chief product officer at Ripjar – which was founded by former GCHQ technologists – agrees. The company uses AI to fight financial crime by automatically identifying risks from data and transforming institutions’ approaches to know your customers and anti-money laundering (AML) solutions.
Hopkins admits that the implementation of these sanctions is “extremely complex” given the links between Russian individuals and companies with Europe and the United Kingdom. This presents a huge regulatory challenge for the industry, including for fintech companies such as neobanks, which are 100% digital and use online apps and platforms rather than branches, and others that trade across borders. international.
He argues that banks and other financial institutions must have a “balanced sanctions and watchlist management approach” to ensure “100% adherence” to global sanctions lists while using other supplemental lists for insight. holistic risk.
Part of the puzzle to solving this problem involves machine learning and advanced analytics to automate the screening process, he says, with next-generation name-matching software ensuring that banks and financial players can: “Maximize true positives on global sanctions and watchlists and minimize false positives.”
But to get there, Hopkins highlights a big breakthrough that will be vital and urgently needed: fintech companies are operating a range of language systems.
He adds: “In the future, there will be a greater need to process matches that include Cyrillic, Asian and other character sets with Western or Latin names and vice versa. Being able to distinguish and make connections between Latin and non-Latin linguistic systems is essential for names that have alternate spellings.
“For example, Vladimir may appear completely different and should be tracked separately, but also treated as the same name.”
Many business leaders face difficult circumstances, but few compare to running a business in the middle of a war. When conflict erupted in Syria in 2011, Louai Al Roumani found himself in this unenviable position.
As head of finance for Banque Bemo Saudi Fransi (BBSF) – Syria’s largest private commercial bank – Roumani was tasked with leading the company through its most difficult time. The horrifying images of the war in Ukraine remind him of his experiences in Syria.
“The Syrian civil war differs from the conflict in Ukraine because there was not a single turning point. It was more gradual and as things escalated it turned into one of the worst wars of modern times,” he says.
A warrior and a philosopher
Now living in London, Roumani wrote about his experience as CFO of BBSF during the Syrian conflict in his 2020 book Lessons from a war zone. “When you work in such a crisis, you almost need to become both a warrior and a philosopher,” he says. “You face daily challenges which make things so much harder on the pitch, which have to be constantly overcome. There is very little room to go wrong.
At the start of the war, Roumani and his colleagues wondered how it would end. They found themselves imagining the many different scenarios that could unfold. “In times of war and crisis, it is very tempting to think only short-term and focus on short-term solutions,” he says. “It’s easy to let the overriding sense of impending doom take over and make you feel like everything is falling apart, that there’s no way things will get better.”
This exercise proved futile, with the ongoing conflict over 11 years later. Bank executives “decided to take a step back,” he says, becoming more stoic and asking important questions. “Whether the war ends tomorrow or in 10 years, whether the United States interferes or not, we are a bank – what do we need to do well?”
By focusing on the things they could control, rather than external factors, BBSF continued to operate despite the crisis unfolding outside. “When we started approaching it in this way, it became clear to us that there were things we needed to do right no matter what, and those are critical factors to our success,” Roumani says. .
One of the first barometers of a crisis are the queues. In the UK, at the start of the Covid-19 pandemic, long queues outside supermarkets were a sure sign that people feared the worst. As impending war approached in Syria and Ukraine, people lined up for banks to withdraw their money.
This presented a challenge for BBSF. “Most other banks have limited withdrawals. They were telling people not to withdraw their money or trying to delay the withdrawal,” Roumani says. “We took a risk and did the exact opposite.”
Rather than adding to the panic outside the banks, BBSF decided to reassure people that it had sufficient reserves. Banknotes were piled up in counter display cases and people started sharing photos of the stacks of money. “We wanted to send the message that we had good liquidity and that we were open for business,” Roumani explains. “If people wanted their money, they could take it.”
He believes this has helped maintain trust between the bank and its customers. This is in stark contrast to other banks that have chosen to delay withdrawals, further panicking their customers. “Although we lost cash in the short term, in the longer term people remembered our way of doing things and within three months they got their deposits back,” Roumani says. “That’s why it’s important to be a philosopher, because you have to resist the instinct to tackle short-term problems and think about long-term goals instead.”
Shake the survival instinct
However, it is difficult to focus on long-term ambitions when conflicts are happening around you. During the war, Roumani had to deal with mortar shells hitting the bank where he worked and threats of kidnapping. About a quarter of the bank’s branches were destroyed during the war.
“You can imagine how awful it was to handle operations when ISIS was rampaging through some of our branches,” Roumani said. Even in these situations, Roumani was reluctant to focus on survival. “If survival becomes your only goal, you limit yourself to not dying. It becomes almost suicidal – you stop taking risks and focus on protection,” he says. “You don’t face a crisis by simply taking the easy route: you have to go beyond it.”
Some people assume that economic activity stops during a war and businesses close. Roumani recounts a phone call he had with a Finnish company. “When I mentioned I was the CFO of a bank in Syria, he thought I was playing a prank on him,” he says.
“Although we lost a quarter of our branches, it did not destroy the main dynamic of the sector in which we operate,” explains Roumani. “Even in times of war, people continue to live.”
While around 6.8 million Syrians left the country as refugees or asylum seekers, more than 17 million people remained in the country. “Imports continued to be made every day and there was still economic activity, although it had been greatly reduced,” Roumani said. “People have to go on with their lives, despite the crisis. I was the CFO of a bank and we had thousands of depositors, so we had to go to work. I couldn’t sit at home doing nothing.
Many Ukrainian companies today find themselves in a similar situation. Despite the Russian invasion, these companies are finding ways to continue working while keeping their staff safe. “I’m sure they’re going through the same thoughts as us,” Roumani said. “With so much large-scale destruction happening around you, it becomes very easy for this negative narrative to dominate and not allow you to see any opportunity.”
However, he advises companies to stay focused on their critical success factors. Stakeholder management is also becoming an essential skill. “In a crisis, all of your stakeholders become much more demanding – shareholders, customers, government, regulators, suppliers,” he says.
To take part
In these cases, it’s important to show your support with actions rather than words. “Everyone tries to make people feel better by trying to reassure them, but without backing them up with action, people will stop trusting you,” Roumani says, reflecting on her own experiences.
“There was no way to talk about mental wellbeing when so many of people’s basic needs were unmet. Instead, we took action by moving people and their families out of dangerous areas. Making sure we met those primary needs was essential, because if we didn’t, the rest of our actions wouldn’t matter.
Business strategies must also be flexible to react to ever-changing circumstances. Roumani’s experience at BBSF shows that by focusing on long-term success, remaining flexible and embracing the warrior/philosopher mentality he describes, it is possible to run a successful business in the midst of a war zone.
“There’s no way to predict what’s going to happen, even if you have a team of 20 analysts around the table,” Roumani says. “Rather than wasting time planning, build flexibility into almost everything you do. We had no idea which branch would be ransacked by ISIS or other groups, but what we could do was make sure that branch staff, customers and assets were protected.