Instant Payments – what are we sacrificing in order to meet service levels?
The siren song of instant payments has captivated consumers and businesses, promising the allure of real-time transactions. However, in our sprint towards instantaneous gratification, are we inadvertently leaving the door to risk wide open? This rapid shift has propelled compliance and risk professionals to navigate a precarious tightrope – ensuring regulatory adherence, minimising risk, and meeting service levels in the blink of an eye.
The pressure is palpable. With seconds at stake, traditional compliance routines seem like cumbersome relics of a bygone era. KYC/AML checks, sanctions screening, and fraud detection – once essential safeguards – now pose as potential bottlenecks, challenging the very essence of instantaneous gratification. Compliance teams are confronted with an uneasy choice: compromise on risk mitigation or sacrifice service levels – both seemingly unpalatable options.
1. Vigilance vs. Velocity: The reduced window for compliance checks inevitably heightens the risk of undetected illicit activity. Fraudsters exploit real-time systems, deploying ingenious tactics to bypass defences. With less time for scrutiny, even seemingly innocuous transactions could slip through, potentially fuelling money laundering and other nefarious activities.
2. Accuracy vs. Agility: The rush to meet service levels can lead to hasty decisions and rushed assessments. Shortcuts taken during KYC/AML verification might leave blind spots, exposing banks to regulatory fines and reputational damage. Pressure to approve transactions instantly could also result in false positives, inconveniencing legitimate customers.
3. Transparency vs. Technology: The opacity of some AI-powered risk-management solutions raises concerns about accountability. Without clear insights into algorithmic decisions, compliance teams are left in the dark. This lack of transparency could undermine trust in the system and make it susceptible to bias.
The current state of affairs is unsustainable. Instant payments cannot come at the cost of a robust compliance ecosystem. To navigate this terrain:
1. Technology Transformation: Banks must invest in modern, agile infrastructure capable of handling real-time transactions. Seamless integration of AI and machine learning tools, ensuring explainability, can enhance risk detection.
2. Collaborative Innovation: Regulatory bodies, financial institutions, and technology providers must develop standardised practices for real-time compliance. Sharing best practices can minimise operational friction and improve risk management.
3. Risk-Based Prioritisation: Implementing nuanced risk-based models allows for tailored approaches, focusing scrutiny on high-risk transactions while facilitating swift processing for low-risk ones.
As the industry navigates this complex landscape, compliance and risk professionals are at the forefront. Their expertise is paramount in ensuring a secure and sustainable future for instant payments. Failing to secure the door on our way to speedier transactions could leave us vulnerable to a perilous instant – one filled with fraud and regulatory repercussions. Let’s not sacrifice vigilance for velocity; let’s find a way to have both.