W&F Q1 2023

16. Overwhelm Impacts 90% of Payment Compliance Teams as They Combat Record Levels Of Fraud Payment company compliance teams are being pushed to their limit as new research from regulatory intelligence specialists VIXIO reveals 90 percent are frequently overwhelmed. The impact of Russia’s invasion of Ukraine, paired with poor economic conditions in the wake of the Covid-19 pandemic, has left many payment companies in a precarious position. Half (50 percent) listed fraud as their biggest challenge over the last 12 months. Countries worldwide have implemented restrictive sanctions, which led to the highest number of regulatory events ever recorded by VIXIO, at 243 in March 2022 alone (with the monthly average standing at 165). Rising levels of fraud are now forcing firms to alter their plans. Increased fraud was a particular concern for teams in the UK (20%) and Brazil (21%) – two countries where instant payments and, consequently, authorised push payments (APP) fraud have both become a growing issue. The 2023 Payments Compliance Outlook: Thriving in Uncertain Times surveyed 202 senior and executive compliance and regulatory professionals at global payments companies in the UK, US, Germany, and Brazil across multiple sectors. It found that, despite the threat of recession and the need to cut business expenditure, payment company executives are increasingly willing to commit additional resources to avoid trouble from regulators. To tackle future threats, almost 40 percent of compliance teams are prioritising new market entry in 2023 (44 percent in the US), with 35 percent supporting new product licensing (45 percent in the UK). Andrew Neeson, Managing Editor and Research Director at VIXIO, says: “Payment companies are going through a particularly hard time, but we are seeing great innovation in response to the pressure. Many firms are harnessing new and alternative payment technologies, with 93 percent looking to achieve growth through M&A. This is to increase revenue, resolve compliance and security problems, and protect their core customer base from competitors and risks. Additionally, 49 percent of compliance teams are investing in greater internal regulatory monitoring systems to manage the burden they’re facing.” Whilst tackling fraud remains the biggest priority for almost half (47 percent) of compliance teams going into 2023, 43 percent cite data protection and anti-money laundering as their biggest concerns. Andrew Neeson believes that in these challenging times, firms will have to grow more inventively: “Firms that are willing to take a risk and focus on new payment technologies such as open banking, new payment options, instant payments and cryptocurrency can gain an edge. It will protect and enhance their core customer base and future-proof their business.” As a result, Jan Van Vonno, Head of Industry Strategy at Sweden-based open banking specialist Tink, believes that the next 12 months presents a tipping point for the adoption of opening banking across Europe: “If we look at the UK, Open banking payments have grown 500% year on year, as more institutions have realised the benefits open banking can bring, such as reduced costs, low fraud and a better user experience. In tandem, the regulatory environment is becoming increasingly accommodating of open banking payments – for example, the EU’s latest rules for Eurozone banks to offer instant payments. “Open banking is set to become mainstream faster in some markets such as the UK, Germany, France and the Nordics.” Hopes that open banking, M&A and investment in regulatory expertise set to reduce the burden in 2023.