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PSPs Must Prioritize Financial Crime Controls to Ensure Sustainable Business Model

Payment service providers (PSPs) are facing increasing pressure to ensure their financial crime controls are robust and effective, as regulatory scrutiny intensifies. To maintain a sustainable business model, PSPs must adopt a proactive approach to countering financial crime, rather than simply reacting to incidents.

Analytics-Driven Approach Crucial

Leading firms are adopting an analytics-driven approach to assess the risk of customers throughout their life cycle. This involves drawing on dynamic data such as transaction flows and static data like customer segments and geographical risk rankings to better risk-rate customers. Some PSPs are even developing AI models that learn from historical investigations to segment and prioritize alerts.

Customer-Centricity and Transparency Key

Strong anti-financial crime controls need not have a negative impact on customer experience. In fact, they can enhance customer trust and satisfaction by being transparent about requirements and processes. For example, clear communication about onboarding progress and outstanding documents can improve the customer journey.

Considerations for Sustainable Operating Model

PSPs must balance the dual purpose of higher speed and lower risk when designing their control mechanisms. This requires policy decisions that calibrate the level and timing of due diligence conducted on new merchants or customers. Operational choices will also need to balance customer experience, cost, and responsiveness.

Lessons from Banks’ Experience

Banks have invested millions in detection infrastructure, but many projects have proven only marginally effective. PSPs can learn from this experience by avoiding ineffective approaches and instead focusing on embedding controls within processes and decisions.

Best Practices for PSPs

• Embed controls within processes and decisions
• Design controls in proportion to the business model
• Think ahead and focus on data
• Always build a business case
• Plan for complexity
• Extract better value from existing controls
• Consider the unintended benefits of a strong financial-crime risk management program

Conclusion

PSPs must prioritize financial crime controls to ensure their sustainability. By adopting an analytics-driven approach, focusing on customer-centricity and transparency, and considering best practices, PSPs can maintain a robust control infrastructure that balances speed, risk, and customer experience.