How we can safeguard customers using a joint account alternative 🚧

We've explored how safeguarding might work with our joint account alternative.

How will Know Your Customer (KYC) affect our joint account alternative?

Our system will need to go through the usual important checks to make sure that people who hold accounts with Cocoa are who they claim to be, a process called "Know Your Customer", or KYC.

Since Cocoa treats each person as a separate entity, each person will need to assure Cocoa that they are who they claim to be by providing various documents, will need to be considered against a list of PEPs (Politically Exposed People) and Sanctions.

Another safeguarding challenge, and one of the biggest, is thinking of how to protect against one person using our solution to control or coerce the other, which has been observed to happen in joint accounts at the moment.

This could look like a situation where the relationship between the two individuals could be of a malicious actor and an individual under who is being coerced, for example being used as a money mule where money is paid to them but that they are forced to withdraw in cash and return.

This could be very difficult to detect but there could be monitoring by the app to alert if one individual has many accounts with other individuals, or repeats the same actions within multiple accounts or getting the same amounts sent. This monitoring would also involve looking at the wider network, for example where the payments are going, whether they look like standard household bills or whether money is being sent abroad and if so what the purpose is.

How will Credit Scoring affect a joint account alternative?

What do joint accounts and credit scoring currently look like?

In short:

The couples' credit score has a big impact on joint banking decisions.
Opening a joint bank account links the couple's credit ratings.
Any debt or overdrafts incurred are the responsibility of both account holders.
At the moment, the process of removing financial associations with someone else is thought to be difficult, and may require co-ordination between the two which may not be practical, possible or safe in some situations.

There are also cases of individuals still being un-knowingly linked with someone six years after a breakup and closing of joint accounts.

Special mentions:

Credit cards must always be under one 'main cardholder', who can authorise other users on the card. This means, though, that any debts incurred are the sole responsibility of the main cardholder.
In light of the issues highlighted in the FCA TechSprint, it's important to note is that credit accessibility is so important, particularly in light of statistics like women being more likely to be financially dependent on ex-partners.

So how does our joint account alternative address these issues?

Let's take a look at some scenarios comparing the current joint account structure to our Open Banking-powered alternative.

Archie doesn't add his portion of the wifi bill to the joint account. The direct debit fails.

🚫

Wifi company records this as a mark against both Anna and Archie.🤦🏼‍♀️🤦🏽‍♂️

☕

Our solution treats Anna and Archie's joint account alternative accounts as 'sole accounts', so kept a record of Anna's full payment. Anna's credit score isn't impacted!

Anna and Archie split up before deciding how to divide the joint account and close it up.

🚫

Archie decides to take the entire contents of the account and doesn't co-operate in Anna's attempts to jointly close the account. Anna loses her £1000, and as they're still associated her credit score is vulnerable to Archie's financial decisions.

☕

Our solution limits access to only each account holder's own balance, so Anna's money is safe. Since both accounts remain sole accounts, Anna and Archie aren't financially associated until they take out a joint credit arrangement, such as a mortgage. If they do share credit, closing their joint account alternative will not end the association (remember — it doesn't count as an association!). In either case, Anna needs only close her account to end the joint account. So simple!

Archie missed his portion of the car finance payment, which means the payment failed to go through, impacting both Anna and Archie's credit score.

💭

Unfortunately, our solution only addresses the issue of combining joint accounts, and we hope that credit companies will begin to evolve their model to address this issue, and give individuals more control over their own finances, this remains an issue for people who choose to take on a joint finance or credit agreement.

Made with ❤️ at an FCA TechSprint, 2021