To consider today’s payments landscape is to be confronted with a puzzle of innumerable pieces.
With ongoing initiatives such as anti-money-laundering regulations and PSD2 in the regulatory space; EBA Clearing’s RT1 scheme and Swift gpi in the traditional banking space; and as a raft of developments in the fintech space, it’s no easy job keeping track of all the constituent parts.
But, as is the key to any puzzle, we must begin with the corners—and the cornerstones of the payments landscape remain unchanged. These are the end users’ need for security, speed, transparency, efficiency and global reach.
The first few of these "corners" are being well addressed by innovation. Global reach, however, represents a trickier proposition and is therefore perhaps the most urgent priority in terms of payments evolution, making adoption of initiatives such as Swift gpi a priority for the industry.
To meet the call for increased security, an array of initiatives have been launched from regulators, market infrastructures and nonbank competitors.
The EU has led the way in this respect, through the Fourth Anti-Money Laundering Directive, which requires banks to practice enhanced client due diligence, and 2015’s Funds Transfer Regulation, which stipulates that payment service providers must ensure that required information on both payer and payee is included in every transfer of funds. The recent second Payments Service Directive also contributes to security through its requirement for two-factor authentication for electronic payments.
In 2015, the U.S. upscaled its payments security with the launch of the Secure Payments Task Force. Looking to advise the Federal Reserve on payment security issues, identify payment security objectives for industry action and collaborate with the Faster Payments Task Force to find payments approaches that are both fast and secure, this body aligns with industry efforts to instill greater systemic integrity in the financial system.
Industry players and market infrastructures, too, have been developing solutions, such as Swift’s Customer Security Programme, that look to build a safer payments environment. Devised in 2016, Swift’s CSP is a client security control framework made up of both mandatory and advisory security controls, for all Swift users.
Against this backdrop of ever-increasing cybercrime sophistication, banks can remain proactive in two key areas: investing in improved risk management systems and developing real-time fraud detection. Artificial intelligence technologies can lend a hand here by identifying high-risk behavioral patterns and keeping banks ahead of developing money laundering and cybercrime threats.
