“The Payments Association brings together a broad range of industry participants to identify and address prevailing risks and issues. It plays a leading role in looking around corners for the sector and provides an important forum for interaction with regulators.”
Max Savoie, Partner, Sidley AustinWelcome to the Autumn edition of Payments Review. In this issue, we look into some of the challenges merchants face, including the real cost of chargebacks and the rise of friendly-fraud.
Our cover feature dives into the impact chargebacks have on smaller businesses and what merchants can do to minimise losing revenue as well as what payment providers such as Mastercard and Visa are doing to prevent card-not-present fraud.
We also have a sneak peak of what The Payments Association’s manifesto includes, which it plans to launch ahead of the party conferences, with the aim of developing the UK’s payment industry into a world leader through innovation.
Finally, with the PAY360 Awards fast approaching, this edition of Payments Review also includes a shortlist of all the finalists for this year’s awards.
P5 What the Farage Coutts scandal means for the banking sector going forward
P10 How can fintechs get the customer experience right?
P12 How the Bank of England’s renewed RTGS system could change the payments landscape
P17 News in brief: The latest updates in payments
P18 How AI can finally break-up the finance industry’s monopolies
P26 The Payments Manifesto: Driving innovation to make UK the global leader in payments
P28 Spotlight: Amazon Web Services’ Sandeep Kaur speaks about her career in the payments industry
P34 The benefits and challenges of using open-source software in payments
P37 First-party fraud: Why it is the hardest to prove
P40 Conversational commerce: What AI means for online retail
P42 Payment security: Why anti-virus and firewalls are essential for businesses in this sector
Anjana Haines
Editorial director
Anjana.haines@thepaymentsassociation.org
Jyoti Rambhai
Editor
Jyoti.rambhai@thepaymentsassociation.org
George Iddenden
Reporter
george.iddenden@thepaymentsassociation.org
Tony Craddock
Founder and director general
Ben Agnew CEO
Mark Bethell
CFO
Emma Banymandhub
Events director
Maria Stavrou
Operations director
Tom McCormick
Sales director
Tom Brewin
Head of projects
Riccardo Tordera
Head of policy
Sophie Bossier
Head of membership engagement
Gavin Alexander
Content marketer
Tyler Smith
Projects and content co-ordinator
Jay Bennett Projects assistant
Anant Patel
President of international markets, ConnexPay
David Monty
Co-founder, Tell Money
Joe Hurley
Chief commercial officer, Crown Agents Bank, Kai Zhang
Special counsel, K&L Gates
Khalid Talukder
Co-founder and CEO, DKK Partners
Kit Yarker
Director of product and propositions, EML Payments
Miranda McLean
Chief communications and sustainability officer, Banking Circle
Sarah Jordan
Director, Deloitte
Manish Garg
Investor and director, VE3
Annmarie Mahabir
VP - principal payments consultant, Endava
Bob Kaufman, founder and CEO, ConnexPayRemarkably, nearly one-fifth of organisations persist in relying solely on manual data reconciliation.
The UK government provides guidance on how to tackle data quality, referencing how experts think that organisations spend between 10-30% of revenue on handling data quality issues.
A 2017 study shows that a staggering 87% of accountancy professionals work overtime during the financial close process. Stress levels skyrocket for 60% of these professionals, with a quarter eventually leaving their company due to heightened pressures.
Astonishingly, 73% of organisations still grapple with manual, spreadsheet-based systems, while 84% yearn for streamlined procedures.
Many businesses are moving away from Excel spreadsheets and adopting advanced enterprise resource planning systems like SAP and Oracle. These systems offer valuable financial insights, but their true potential is unlocked when paired with comprehensive payment systems.
Imagine a solution that simplifies the process of reconciling payments, allowing finance teams to bid farewell to the laborious task of matching transactions from various suppliers, buyers, and systems.
And even better, this solution already exists. By centralising incoming and outgoing transactions within a single platform, the need for manual efforts is eliminated, saving time, money, and resources.
Automated reconciliation is the key, enabling instant matching of transactions. This integration between payment processes and financial systems reduces the chance of errors and discrepancies. The outcome is improved accuracy, greater efficiency, and enhanced cash flow.
Additional benefits include:
• Useful insights: Ensuring finance teams have access to accurate data empowers them to extract meaningful insights and make informed decisions on resources.
• Time and cost savings: Automated reconciliation eliminates the need for labour-intensive manual data matching. Businesses no longer need to allocate valuable resources to find and fix errors.
• Faster expansion: By removing obstacles and simplifying payment operations, companies can scale their operations faster and with confidence. The reduction in reconciliation time allows businesses to focus on new opportunities.
• Reporting and analysis: Robust reporting and analysis features enhance the speed and accuracy of the reconciliation process. Finance teams gain comprehensive insights and actionable data, enabling them to identify trends and optimise processes.
It’s time for businesses to move away from disjointed payment processes and embrace the power of integrated payment systems to drive their financial operations forward.
Payments Review is published by The Payments Association. Payments Review and The Payments Association does not necessarily agree with, nor guarantee the accuracy of the statements made by contributors or accept any responsibility for any statements, which are expressed in the publication. The content and materials featured or linked to are for your information and education only. They are not intended to address personal requirements and not does it constitute as financial or legal advice or recommendation. All rights reserved. Payments Review (and any part thereof) may not be reproduced, transmitted, or stored in print, electronic form (including, but not limited, to any online service, any database or any part of the internet), or in any other format without the prior written permission of The Payments Association. The Payments Association, its directors and employees have no contractual liability to any reader in respect of goods or services provided by a third-party supplier.
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For businesses enmeshed in a whirlwind of transactions and B2B disbursements, the onus on financial teams is nothing short of monumental. Harmonising records and resolving reconciliation problems evolves into a laborious undertaking that can diminish revenues.
With AI changing the world, why is data reconciliation stuck in the ‘90s?
After an embarrassing scandal which saw Coutts CEO Peter Flavel and NatWest boss Alison Rose both leave their positions over the closure of Nigel Farage’s bank account, the UK banking sector may now be forced to react.
The episode has forced a rethink on how the wider banking sector, which is already under fire from the Treasury committee over claims of “profiteering” from savers, should move forward to protect its reputation.
Farage has since demanded compensation from the 330-year-old bank, worsening its own blushes and causing ripples throughout the sector on
the implications of similar scandals.
As far as immediate impacts of the fallout, senior banking officials are likely to be looking over their shoulders after the surprising departure of NatWest’s Rose which Standard Chartered CEO Bill Winters called a “heavy price to pay” after her admittance of a “serious error in judgement”.
NatWest also came under fire from politicians on both sides after it emerged that Farage’s accounts were banned as a result of “public statements which were felt to conflict with the bank’s purpose”.
Samuel Gregg, economist with the American Institute for Economic
Research, said the situation demonstrated why company leaders should be wary of involving themselves in political debates.
Gregg told Reuters: “Banks have ended up caught in British political crossfire because they have been ‘coopted’ into supporting an array of causes, left and right, instead of focusing on delivering profits and shareholder value.”
It could also pave the way for further scrutiny for the industry from the government, with Harriet Baldwin, chair of the cross-party Treasury committee saying recently that banks should be implored to inform customers when better savings rates are available elsewhere.
Baldwin said in a statement that the “time for foot dragging and weak excuses is over”, given that lawmakers are in agreement on the fact that action is required.
Alongside the comments from Baldwin, Andrew Griffith, the economic secretary to the Treasury, tweeted about the reformation of the conditions of banking licences. Meanwhile, other regulatory responses are also being considered.
Farage has also announced his mission to stop the same thing happening to others, demanding a meeting with Coutts and NatWest bosses on the subject.
The GB News presenter’s savvy media personality may help to force the government to act in defence of those whose bank accounts have suffered a similar fate off the back of their own personal views.
Aside from possible future intervention from the government, consumers may choose to do their business elsewhere, with a swathe of around 10,000 ex-
NatWest customers joining a Facebook group detailing their bans and sharing templates for Subject Access Requests for dossiers held by the bank.
Jessica Cath, Thistle Initiatives head of financial crime, told Payments Review: “The Farage-PEP episode is certainly going to have an impact on financial services firms. The FCA has requested banks provide data on the reasons behind account closures as
part of an investigation, that will lead to further guidance.
“However, I hope the conversation moves beyond just PEPs, as there are many other customer segments that experience de-banking and don’t have the same voice as Farage.
“Having said this, firms do still need to have the flexibility to offboard customers where they cannot effectively manage material risks.”
The FCA has requested banks provide data on the reasons behind account closures as part of an investigation, that will lead to further guidance.”
Rumours were circulating in the press in the summer (July) that the government may shelve plans to regulate buy-now pay-later (BNPL) products, over fears that regulation could push service providers away and lead to less available low-interest credit products.
Regulation for the products has been in development since the Woolard Review was published in January 2021, which found an “urgent need” for regulation in the space to protect consumers.
The suggestion that the regulation could be shelved has surprised a number of people, as development of the rules was well underway with a consultation launched in February 2023, concluding in April.
According to a report from the Centre for Financial Capability, 36% of UK adults have used BNPL, up from 29% in 2021, showing the fast-growing adoption of the product.
For consumer groups, the news has been a blow. “If these reports are true, it is a huge backwards step,” says Katie Watts, head of campaigns at consumer group MoneySavingExpert (MSE).
In order to offer consumers the same protections that other forms of lending do, BNPL needs to be regulated, says Watts. “BNPL is a debt and therefore should play by the same rules as other forms of debt.”
The suggestion in the reports is that BNPL firms have expressed concerns
about the burden that regulation would put on their operations if they were brought into the scope of laws such as the Consumer Credit Act.
Other market participants do not think that BNPL regulation will be shelved, but that it may be delayed instead.
“BNPL will be regulated in the UK,” says Luke Seaman, head of public affairs for Klarna UK in response to the rumours. “The arguments in favour of regulation are too strong.”
For Klarna, the largest BNPL provider in the UK, the delay may not be all bad. “If BNPL regulation is delayed in an effort to make sure it’s effective and not just a tick-box exercise, then that’s a good thing,” he adds.
As there are many jurisdictions where BNPL has not taken off so much as in the UK, that means elsewhere, regulators have not yet started looking at the products. This is a concern for the government as BNPL providers have said that if rules are put in place that are too complicated, they will exit the market.
In the UK, BNPL products are not currently regulated. They are exempt from the Consumer Credit Act because they do not charge interest on the payments. Instead, firms based their business models around fees to merchants who use BNPL as a payment option and/or late fees when consumers have missed payments.
With uncertainty over the future of regulating BNPL products, Payments Review examined the current status, the impact of any legislation and what protection three of the UK’s largest providers have in place.
Lucy Frost
36% of UK adults have used BNPL.”
Particularly during the cost-of-living crisis, the main concern from a consumer protection perspective is the affordability of the loans.
“One of the concerns is that a consumer may only take out small loans with each BNPL provider, but they may hold multiple BNPL agreements that are collectively unaffordable for them,” says Rachpal Thind, partner at Sidley Austin.
In an unregulated environment, it would not be clear to a provider if they have BNPL loans elsewhere as there is no requirement to either run credit checks or provide data on customers to credit reference agencies.
Added to that, the option which BNPL provides of paying for more expensive items in smaller chunks can incentivise people to spend more than they usually would or buy goods and services that they couldn’t necessarily afford without the BNPL provision.
“BNPL is not in itself a bad product,” says MSE’s Watts. “Used right it can be a useful and cheap way to spread costs.”
The other concern is that consumers often see BNPL alongside other payment options like PayPal or Apple Pay. This can mean people do not think about it as a form of debt, since they do not have to go to the bank and apply for the loan. That can also incentivise people to take on debts who may not usually.
“Regulating BNPL would effectively apply controls to the marketing and promotion of these services, and the information given to customers, making clear that this is not a lifestyle choice, it is a form of debt and there are consequences for not making repayments,” says Watts.
“Regulation would also mean BNPL provides section 75 protection, like with credit cards, if something goes wrong.”
Section 75 is a part of the Consumer Credit Act, which means that credit
providers have to refund a customer if they did not receive the goods or services they paid for and cannot get a refund from the original supplier.
Under the proposed rules, Watts explains that regulating BNPL would also force higher standards for complaints too, including giving consumers access to the Financial Ombudsman Service, which can independently adjudicate any unresolved complaints and can enforce its decisions on BNPL providers.
The industry view While firms are keen for the sector to be regulated, a common theme is apparent – the need for fit-for-purpose and appropriate regulation of the industry.
This is in contrast to the current proposals, which would see BNPL brought under the Consumer Credit Act.
“The consumer lending market was very different when the Consumer Credit Act was adopted in the 1970s,” says Thind. “Market participants have expressed concern that the prescriptive requirements of that act are not practical for online point of sale credit.”
The Consumer Credit Act was also created for a market of much larger loans over much longer tenures and have interest, whereas BNPL loans are much more limited, interest-free and consist of a set number of payments.
“There is a need for bespoke regulation designed for the sector,” says Gary Rohloff, managing director and cofounder at BNPL firm Laybuy.
The other concern is finding a way to effectively apply a credit checking process in what is normally an instant process of clicking the BNPL provider option at checkout.
Such credit checking can be an important part of ensuring consumers can afford to take out these loans even though each BNPL provider do not offer consumers much debt. This is
because it can allow firms to see an individual’s whole credit profile as they may have many other small BNPL debts outstanding that add up.
Generally, firms in the industry are supportive of bringing in regulations, so long as they are well fit for the fintech environment.
“Clearpay already has safeguards in place to protect consumers, but we recognise that not every provider has the same approach,” says Rich Bayer, UK country manager at Clearpay. “This is why we support proportionate and appropriate regulation that sets high industry standards across the board.”
Meanwhile, Laybuy were more descriptive about what positive regulation could look like: “Regulation should include, at a minimum, a requirement to credit check consumer, obligations around responsible marketing, requirements on duty of care, and access to an independent dispute resolution service,” says Rohloff.
A number of firms already share data on BNPL product usage with credit reference agencies to ensure these debts are taken into account in credit checks, however this is not standard across the board.
The levels of protection for buyers varies across the industry. Some BNPL firms have pre-empted what could come with regulation and have initiatives which reduce concerns over affordability and the complaints system.
Clearpay, for example, has a spending limit, starting customers on a low amount of up to £450. The company also requires customers to make their first repayment upfront. Customers cannot use a product if they miss a repayment, their account is paused, and they cannot use it again until payments are up to date.
BNPL is not in itself a bad product. Used right it can be a useful and cheap way to spread costs.”
There is a need for bespoke regulation. ”
A major concern for consumer protection groups, however, is that all these initiatives are run internally and vary among provider, so there is little recourse for the consumer to an independent body.
In terms of complaints, Klarna has attempted to facilitate this service by appointing an internal ‘complaints adjudicator’, which replicates the support of the Financial Ombudsman Service, by providing a review for any customer unhappy with the resolution of a usual customer services complaint.
However, as this is not independent, it’s not clear how effective this tool can be.
Klarna has also introduced the industry’s first voluntary ‘credit opt-out’, as an option to help people set limits on their spending through BNPL. While firms are creating numerous initiatives to promote consumer protection and not encourage unaffordable debt, the lack of an industrywide standard in the space is an issue.
Another major area of concern is what happens when things go wrong, where there are more complicated outcomes that those paying with BNPL are unlikely to think about in advance.
If a BNPL provider went into administration while a customer still had outstanding debts, this is unlikely to impact what the consumer has to do
If a customer purchases an item with BNPL and then wants to return it but in the meantime the supplier goes bust.
In this situation, the consumer still retains the right to a return, but the BNPL provider is not liable to cover this.
very much. However, if a BNPL provider goes insolvent while a consumer has an outstanding complaint lodged with them, regulation would offer better consumer protection.
The regulator wouldn’t wind down a company or allow them to be wound down until all consumer complaints had been addressed.
“With the extension of the Consumer Credit Act to BNPL credit products, consumers would be protected against a breach of contract or misrepresentation by a supplier, because section 75 of the Act would allow a borrower to raise a claim against its BNPL lender for any such breach or misrepresentation,” says Sidley Austin’s Thind.
However, while the space is unregulated, BNPL providers will have different approaches to these greyer areas.
Even outside of the regulated environment, there is one legal protection which consumers can use regarding BNPL products, if the contract is deemed to have unfair terms. However, the rules for this are fairly subjective and would require the consumer to sue the provider in question – meaning it’s unlikely to be a helpful port of call for many BNPL users.
As the industry waits to see whether the rumours that the government has planned to shelve the plans is true, all eyes will be on the consumer protection concerns posed by BNPL products.
Payments Review asked BNPL providers how they would handle this kind of legal grey area.
If a supplier closes its operations and doesn’t provide the Clearpay customer the goods/services they’ve paid for through BNPL, Clearpay will refund that customer or cancel the debt.
“Our customers will not be in a position where they are out of pocket or lose their legal rights to return,” says Bayer.
If the administrator [of the insolvent supplier firm] refuses to accept a return then the customer is liable to continue making payments to Laybuy, but the firm would work with the customer and help engage the administrator, according to Rohloff.
“If continuing to make repayments in this situation would cause the customer undue hardship or financial difficulty, we would of course work with them and look at different options available, including pausing payment and developing an alternative payment plan. In severe cases, we would also cancel repayments.” he adds.
From building a customised experience to selecting the right channels, Laura Scott examines the key elements firms should consider to meet their customer needs.
Delivering excellent customer support can be a significant differentiator for fintech companies. In the digital age, where customers are expecting instant and effective support, a great customer experience can set a company apart from its competitors.
Fintechs that prioritise customer support can build a loyal customer base and earn a positive reputation in the industry. It is essential for fintech and financial companies to invest in building a robust support team that is knowledgeable, responsive, and empathetic.
By doing so, they can provide a seamless customer experience and gain a competitive edge in the market. Outsourcing that function can bring a wealth of knowledge and experience that may not be already in the business, while also leveraging cost efficiencies.
In an increasingly noisy sector, fintechs need to stand out from the crowd. A joined-up, stand-out, customer experience is key to achieving this from sign-up through to handling any questions a customer has.
Retaining customers
Brilliant solutions are being built and adopted by customers eager to benefit from the very best in financial technology and user experiences with fintechs addressing a range of challenges that incumbents cannot currently support.
Building a customised customer experience further supports attracting and retaining those customers you work hard to obtain in the first place.
An often-forgotten part of the puzzle is how to support and retain these customers.
The fintech sector is evolving rapidly by bringing innovative services to respond to nowadays’ customer needs
and, at the same time, customer support has become increasingly important.
Fintech companies must prioritise it by providing high-quality support to build trust with their customers and differentiate themselves from their competitors. This includes delivering various communication channels, ensuring prompt responses, and providing personalised solutions to meet customers’ needs. Efficient and personalised customer support leads to increased customer loyalty, customer retention, and business growth.
Building a customer service solution that addresses the needs of your customer goes a very long way in supporting this. Via an omnichannel platform, no matter what method of communication a customer is using there is a centralised view of every conversation, meaning responses can be tailored and relevant to that individual, which is coupled with richer insight about what is driving your customers to make contact.
A unified customer experience
Dialect’s customer success manager
Simon Collings stresses that meeting customer needs is a must for fintechs. It’s not just about always launching new products or services to fulfil their needs.
Customer experience plays a crucial role in their journeys. This means creating a positive and memorable experience with customers, from the earliest point of interaction to follow-up support via a variety of interaction channels.
Equally important should be selecting the right channels; digital-first strategies are not always the answer and the customer experience technology should be viewed as an enabler rather than the whole answer.
Provide clear signposting to where a customer can self-serve their needs using
help pages, but also clearly show how to contact support by email, telephone, or live chat, where they can speak to a human.
When it comes to people’s money, they want to know there is support however they wish to access it. If a customer loses their card, an email address that is operational between 9:00 and 17:00 is not protecting your customer funds as required by the UK Payment Service Regulations 2017, for example.
In addition, customers want that unified customer experience and do not expect a conversation on a phone call to then have to be repeated when they call again or even start up a live chat; they expect the advisor to already know who they are and if they have made contact before.
Not only does this unified view support a customer and their needs, but also the business. This is because it reduces contact time, increases first contact resolution, and builds a positive impression that all go towards retaining customers and not being tempted to move to another provider.
So, are you asking yourself the right questions when designing your customer experience?
1. How and when do my customers want to communicate with us?
2. What information do they need and what will be the main reasons they need support?
3. How can they provide actionable feedback?
Fintechs that prioritise customer support can build a loyal customer base and earn a positive reputation in the industry. It is essential for fintech and financial companies to invest in building a robust support team that is knowledgeable, responsive, and empathetic.”
With the recent release of the Bank of England’s consultation paper on its roadmap for real-time gross settlement service beyond 2024, Payments Review examines the potential new features in store and the challenges in implementing them.
Natasha TejaThe Bank of England (BoE) published its consultation paper in April (2023) on the roadmap for real-time gross settlement (RTGS) service beyond 2024, which seeks to gain industry input on what features should be implemented for the next stage of RTGS.
The bank has prioritised key areas of increased resilience; greater access; wider interoperability; and improved user functionality. The highlighted focus areas come amid criticisms from the financial services industry that the BoE’s RTGS system can be archaic; have high barriers of entry, which discriminates against smaller payments and e-money firms; and lacks interoperability with other global RTGS systems.
Victoria Cleland, executive director for payments at the BoE tells Payments Review: “This year, we migrated to ISO 20022 for clearing house automated payment system (CHAPS). Next year, we will launch a new core settlement engine for RTGS – the beating heart of payments in the UK. But we are not stopping there.”
The BoE has decided to prioritise several features for future work that fall into the two categories of resilient channels: innovation and global initiatives.
Resilient channels will examine how RTGS can connect with new networks beyond SWIFT to support greater resilience and allow more choice for firms. Currently, the new RTGS service will support the SWIFT GPI (global payments innovation) service, to allow track and trace of payments for CHAPS members.
The second category – global initiatives – the BoE is looking to prioritise beyond 2024, which look to support cross-border
payments, extend operating hours and synchronisation. Specifically, synchronisation with third-party interfaces, which would allow outside operators to connect with RTGS and ease the movements of funds and assets in an external ledger.
Synchronisation is the label given to linking RTGS to other payment systems or other asset ledgers, such as the Land Registry, so that both ends of the transaction happen simultaneously.
The BoE and the Bank of International Settlements recently published the outcomes from a study specifically looking at housing transactions in its report: Project Meridian: innovating transactions with synchronisation.
There are also significant use cases in areas like cross-border payments and foreign exchange, for example, where liquidity demands could be significantly improved by synchronisation.
PEXA Pay, which is already in operation in the UK mortgage market, allows lenders to take direct control of settlements of the mortgage process rather than relying on conveyancers. In 2022, Hinckley & Rugby Building Society became the first mortgage lender in the UK to utilise PEXA, which currently settles in RTGS on a net basis.
“Synchronisation could see this process combined with a simultaneous change of title on the Land Registry,” says Rob Thickett, digital policy manager at the Building Societies Association.
One of the criticisms that has been levied against the BoE’s RTGS system is the high barriers of entry for becoming a direct participant. The BoE’s renewed RTGS systems aim to provide greater access to such settlement accounts to non-bank payment service providers, but some smaller payment firms feel that the requirements for participation remain too burdensome.
“The BoE’s RTGS initiatives’ new features and capabilities have little to no effect on the overwhelming majority of the non-bank payments and e-money institutions,” says Dmitrijus Apockinas, designated partners at PSP Labs, a UKbased fintech consulting firm.
According to Apockinas, there are only two non-bank payments and e-money institutions members of Bacs, which are PayrNet and Modulr, with PayrNet on the brink of collapse.There are only 12 non-bank payments and e-money institutions are members of Faster Payments (FP). Collectively this is less than 1% of all non-bank payments and e-money firms in the UK.
“Therefore, there are no new RTGS preparation challenges for 99% of the market participants, as they have no access to the payment schemes anyway,” adds Apockinas.
In contrast, over 80% of non-bank payments and e-money institutions in Lithuania are within the Single Euro
Payments Area (SEPA) adherent and connected to SEPA via the Bank of Lithuania’s CentroLink.
“Until BoE reviews access and criteria for admission to Bacs and FP, most non-bank payments and e-money institutions will be left without access to payment schemes in the UK,” says Apockinas.
However, other major financial services firms argue that opening up the system to too many players could create unnecessary risk as it becomes too difficult to monitor the greater number of participants.
“While it’s not written in black and white, the Bank of England doesn’t want to dilute resources too much as if you have fewer participants they are very visible and easier to monitor,” says Christophe Uzureau, research vice president of banking and investment services at Gartner.
“It could reach a stage where it becomes too difficult to monitor all the related risks of having too many participants.”
There are discussions surrounding how to create alternative routes of access for smaller players. For example, smaller players still could benefit from accessing the BoE system via external ledgers.
“One could argue that some of the smaller players could benefit from greater access as they could bring more innovations, but increased access may not be direct access,” adds Uzureau.
Larger clearing houses and financial services firms have also expressed concern regarding allowing small players to participate in the BoE’s RTGS system.
“The possible impact of massively increasing direct participation is that it could reach a point where it could undermine the business models of a big clearing bank,” says an executive at a large European financial services firm.
“Big commercial clearing banks like Barclays, Lloyds or HSBC, may just end up with millions of really low-valued retail clients,” they added. “So this policy question about what the appetite is on direct access is more of an ideological debate.”
As part of the BoE’s review of the RTGS system for 2024 and beyond, extending operating hours has become a key consideration. Currently, it’s renewed RTGS will be capable of supporting 22x5 operation (a 22 hours a day 5 days a week schedule), with settlement windows on weekends as the systems eventually aims to provide a 24/7 service.
The roadmap for 2024 and beyond implies the bank will work towards achieving a near 24/7 operation in the future depending on industry demand.
“Extended operating hours can make a real difference,” says James Turner, knowledge counsel in the financial services and markets department at Travers Smith.
While it’s not written in black and white, the Bank of England doesn’t want to dilute resources too much as if you have fewer participants they are very visible and easier to monitor.”
“The BoE’s plans on operating hours are not fully determined, but their aspiration is that there wouldn’t be any technical obstacles to the system operating near to 24/7.”
However, payment service providers that are mainly focused on domestic payments, such as smaller building societies, gave the feedback to Turner at Travers Smith that they weren’t wholly persuaded by the business case for extended operating hours.
Direct participants and generally bigger players have also expressed that they do not see a business case for extended operating hours, according to The Payments Association’s consultation response to the BoE RTGS road map 2024.
Smaller electronic money institutions (EMIs) and some indirect participants stated that the increased business hours could help increase business, but it varies greatly depending on the nature of the business.
“The whole of the UK banking system has got some fairly historic processes about what time it shuts down,” says an executive at a large European financial services firm. “The one thing that a lot of people seem to want to get is more contingency time at the end of the day. So having the ability to stay open later as a contingency against technical problems or shocks that may occur in the market is quite a wise thing to do.”
While not all firms agree that there is a clear business case for extended operating hours, there is a much more united opinion
from payment industry players that interoperability with other RTGS systems would be greatly beneficial.
“The Bank of England is also preparing the ground for the development of a Central Bank Digital Currency (CBDC) and far greater interoperability with other central banks,” says Imran Ali, director at KPMG UK’s payments consulting team. “This will open the door to greater efficiencies in international clearing and settlement as well as introduce a new digital currency in the UK.”
The implementation of the ISO 20022 standard was the first step into making BoE’s system more interoperable with other RTGS systems as it increases transparency and aligns with global standards.
“ISO 20022 is often described as the new global language of payments,” says Turner at Travers Smith. “The UK is now well up the curve having adopted this standard already, and it will ultimately help payment systems in different jurisdictions talk to each other in a much more streamlined way.”
However, the work being done to make the BoE’s RTGS system interoperable with other central banks is still in its infantile stages with working groups for the new features only created in the last few months.
“I am quite surprised to see that everybody talks about interoperability of RTGS across the globe, but nobody’s offering concrete solutions,” says Apockinas at PSP Labs. “Crossborder transactions remain one of the highest issues in terms of costs, fees and speed of execution of payments.”
Some experts have argued that interoperability, alongside other innovative features, between settlements and clearing systems would be more easily achieved when there isn’t a reliance on Swift.
“From what I have observed in some Latin American and Asian countries, is that since they have their own clearing systems, which don’t rely on Swift, they can more easily implement new features.”
The BoE has initiated some work to examine how to improve cross-border payments. Canada, Singapore and the UK collaborated on a study to assess the existing challenges and frictions that arise when undertaking crossborder payments in 2018.
One of the key issues identified is that RTGS systems in most jurisdictions are based on proprietary standards and protocols and built on legacy infrastructure. The mismatches in time zones and operating hours also posed a problem.
One of the models proposed for a future interoperable RTGS system is based on an expanded role for in-country operators that act as “super correspondents” for settling cross-border payments instead of relying on intermediary banks as correspondent banks.
“For cross-border payments, creating greater periods of overlap – that is, multiple payment systems being open at the same time – has been identified as a priority at a global level,” says Turner.
While the BoE’s renewed RTGS system is a welcomed upgrade, there are challenges firms face when transitioning to the new system including tricky technical documentation and core systems changes.
“It is important that banks don’t adopt a tactical implementation approach to the proposed changes, which we have seen with instances of ISO 20022 adoption; and consider
longer-term strategic investment that enables benefits to be realised as opposed to just compliance,” says Ali at KMPG.
With the slew of required changes, some firms have also expressed concerns regarding the amount of work needed to make the transition within the required deadline. “One challenge that the BoE recognises is bandwidth, given that there are so many critical change programmes in the payments ecosystem at the moment,” says Turner.
“Respondents to the BoE’s consultation were most worried about the BoE’s plans to require positive confirmations of reconciliation and more frequent reconciliations,” he adds. “It’s not clear where the BoE will land on that subject.”
Consultation between the BoE and industry players for the future of RTGS beyond 2024 is still underway.
Cleland at the BoE tells Payments Review: “We are working closely with the payments industry as part of a co-creation process to shape the future of RTGS.”
The bank has placed a significant emphasis on collaboration with industry. “Together we can realise the significant benefits that the RTGS can deliver including enhanced resilience and greater innovation, and ultimately support the evolution of the payments landscape,” she says.
The whole of the UK banking system has got some fairly historic processes about what time it shuts down.”
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The UK has maintained its position as Europe’s leading financial centre despite investment in fintech falling by 57% in the first half of the year, KPMG data has revealed.
The total fintech investment in the UK during the first six months of the year fell to £4.6 billion, marking a heavy fall from the £10.8 billion which was recorded during the same period last year.
Rising interest rates, booming levels of inflation and worsening geopolitical tensions have all helped to dampen investor confidence.
According to Dr Yi Ning, assistant professor at the Gillmore Centre for Financial Technology: “[The UK is a] leading hub for fintech, spearheading innovation
across fields such as AI and digital currencies to constantly drive efficiencies and better support businesses and consumers.”
Ning adds: “While it is disappointing to see the extent of the funding decline,
More than half of challenger banks have admitted to only performing sanctions checks occasionally, according to new research.
The data, compiled by digital compliance company, SmartSearch, revealed that just a quarter of the banks surveyed claimed to always carrying out the appropriate screening processes.
It comes at a time when sanctions within the financial sector are rife due to Russia’s invasion of Ukraine.
Last year’s FCA review found that there were significant weaknesses in the due diligence processes undertaken by challenger banks when it comes to signing up new customers.
it is no surprise to see the UK maintain its place as the leading destination for fintech.”
The decline has been widely recognised by experts as being part of a global trend, with the
The in-person payment space is set to be shaken up after the launch of Tap to Pay by Apple, making it easier for SMEs to accept Apple Pay, debit, credit and other variations of contactless payments.
Merchants are able to accept payments from consumers from just an iPhone or a partner-enabled iOS app, rendering the need for a point-of-sale (PoS) terminal as unnecessary.
This is likely to benefit thousands of smaller merchants who are unable to receive card payments due to the associated costs of using PoS terminals.
number and value of fintech deals decreasing worldwide.
Despite the slowdown, British-based fintech firms have continued to attract more interest and funding than their counterparts across the globe.
The FCA, alongside the banking sector, is considering the expansion of open banking to the savings market in a bid to boost competition.
In a report released at the beginning of August, the regulator announced that banks and building societies have committed to investigating whether open banking could help to provide support for savings customers.
The use of open banking in savings has “the potential to bring consumers up to date” as well as provide “personally relevant information to enable them to make active switching decisions”, the report claimed.
Open banking entered into a new phase in January after the nation’s six largest banks all implemented the requirements necessary according to the scheme’s roadmap.
It will make millions of us redundant. It will turn whole industries upside down. It might even lead to the obliteration of humanity, and its replacement with something smarter and more civilised.
Over the last few months, since the emergence of genuinely smart artificial intelligence systems, some ambitious claims have been made for the technology. Most of them will turn out to be empty hyperbole.
But there is one more modest claim that could well turn out to be true, however. It will re-work the way that finance operates – and finally open a series of what are essentially closed to monopolies up to some real competition.
Since the launch of ChatGPT, and rivals such as Google’s Bard, AI chatbots have been taking the business world by storm. Whether they are actually intelligent is a matter for philosophers to debate.
One point is certain, however. They are very, very useful, especially in business. From composing memos, to writing code, to designing presentations
and analysing data, AI systems can take over many tasks that were traditionally the sole preserve of white-collar professionals.
Nowhere will the impact of that be greater than in the financial markets. There are three main ways that AI will change the industry permanently.
First, it crunches data on an unprecedented scale. In simple payments processing, vast quantities of information must be shuttled about the place at lightning speed, and it has to be done accurately.
In making lending decisions, credit scoring is dependent on collecting information on people in a matter of minutes and using it to make sensitive decisions. In insurance, risk assessments have to be made based on hundreds of varying factors, and the more accurately that is done, the more competitively a contract can be priced.
The list goes on and on. AI systems will dramatically lower the cost of processing all that data, and that will
The American banking industry alone is spending more than $50 billion annually on compliance.”
improve the profitability of all the existing players. But it will also make it a lot easier for start-ups to break into the industry.
Next, AI systems can process customers as well. We have probably all used an AI chatbot when dealing with a bank or an insurance company already, without really realising it (and in fairness probably found it very irritating).
As the software gets better and better, however, the AI assistants may well be virtually indistinguishable from traditional call centre staff, and potentially much better.
In finance, huge amounts of money has to be spent on dealing with customers, usually through call centres that are expensive and hard to run. If AI can replace those, just as with data crunching, it will lower costs significantly, while also making it far easier for new rivals to emerge.
Finally, it will ease the burden of regulatory compliance. The Competitive Enterprise Institute estimates that the American banking industry alone is spending more than $50 billion annually on compliance, and for many financial institutions the cost is running at more than $10,000 per employee.
In the UK, and in most major European countries, the costs will be even higher, given that there are stricter levels of regulation, and the rules are typically more rigorously enforced. It is a lot of money.
Just as significantly, it is often almost impossible for new companies to cope with all the paperwork involved. Indeed, one of the main reasons why the UK retail banking has remained so closed is because many of the challengers can’t get licences. The regulation is too expensive, and too hard to master. And yet much of it is very routine work,
involving little creativity. If it can be automated by AI systems, it will change the market dramatically.
In reality, finance has always, at its core been about processing large amounts of data efficiently and effectively, and it has been dominated by a series of giant companies. Whether it has been in payment processing, or retail banking, or insurance or asset management, the scale required to collect all that data has meant that sheer size is a key competitive advantage.
AI has the potential to change that. Smaller companies and start-ups will be able to match the data of the largest companies. It might not happen right away. And in the first instance, intelligent computers will mainly be used by the established giants of the industry to lower their costs.
Over time, however, that will inevitably change. AI software will make the markets for most major financial products far more open, and it will make it a lot easier for new companies to challenge well established players.
For consumers that can only be a good thing, lowering prices, and improving the range of services available – even if we do occasionally have to deal with a cranky chatbot that drives us up the wall by misunderstanding everything we ask it.
Whether ChatGPT and its rivals are actually intelligent is a matter for philosophers to debate.”
Chargebacks are a pain point for merchants which can sap revenue, cause reputational damage and in extreme cases lead to the loss of processing privilege. Yet their existence underpins consumers’ confidence in using their cards, providing recourse against fraud and unscrupulous sellers.
Since the acceleration of the shift to e-commerce brought about by the pandemic, more consumers have become aware of their rights and the chargeback process. This understanding, though, is often imperfect, leading to many chargebacks filed erroneously which merchants end up on the hook for.
“It’s not just the financial impact that takes its toll, there is a lot of unseen time and admin on the side of the business that goes into these disputes/claims,” says Violeta Stevens, managing director of Union Hand Roasted Coffee.
Mastercard estimates the cost of chargebacks will reach $1 billion in 2023, with merchants bearing most of the cost. The company, along with fellow payment titan Visa, has made changes to try to reduce merchants’ chargeback woes – but there’s plenty merchants themselves can do to minimise the amount of errant chargebacks coming their way in the first place, and to deal with the ones they do receive in a more efficient manner.
The pain Around 0.6% of transactions are chargebacks, according to payment software provider Clearly Payments.
The US-based payment processing company Shift
puts chargebacks for the retail industry at about 0.5%, with ratios higher for digital service providers, and exceeding 1% for providers of financial services and education services (others estimate these figures lower).
Between 2019 and 2021, annual Visa card-not-present sales grew 51% and disputes grew nearly 30% globally, per the company’s internal data.
At around a 1% chargeback rate, merchants are at risk of losing out more than their revenue. Chargeback ratios at which merchants face being put into remedial programs – or cut off entirely – by payment providers vary, but it’s at this proportion where serious problems begin to occur.
One way to reduce the chargeback rate is to contest those that have been wrongly made. Around 68% of chargebacks are successful, meaning that 32% of chargeback disputes fall in favour of the merchant, claims
Payment Cloud citing data from Chargebacks911.
Unfortunately, contesting chargebacks is very expensive, specialised and time-consuming work. The money spent contesting a chargeback successfully can easily be ten times the value of the relevant transaction.
There are numerous steps merchants can take on a non-technical level to reduce their chargeback rate, mainly by stopping them occurring in the first place.
The first, and most obvious, is to provide good customer service so that people whose goods are lost in the post, receive damaged goods, or experience substandard services can access refunds rather than initiating a chargeback.
Products not arriving, the wrong product arriving, products not meeting expectations or not
fitting the description account for 53% of chargebacks, according to Clearly Payments.
Some chargebacks (3%) are initiated because a customer is billed twice. With vigilant customer service and prompt refunding, some of these can be eliminated.
Normal people don’t know that a chargeback incur significant costs for merchants. Many don’t even understand what a chargeback is. But faced with a website FAQ page, no contact details and perhaps a particularly obtuse chatbot, rather than someone who will promptly answer a message or a phone call, filing a chargeback becomes an easier option.
“In the States, you can literally click a button, and you file a chargeback,” says Monica Eaton, CEO at Chargebacks911, saying later that some people see it as a “refund button”.
One of the reasons cardholders often raise a dispute is because they don’t recognise a transaction on their statement or that app.”
Joe Stanley-Smith
I haven’t been to Glasgow for several years and I don’t drink coffee, yet the payment description of a recent transaction to a Patreon-like crowdfunding website makes it look like my card has been used in a Glasgow coffee shop.
I didn’t know the website (a Patreon-like crowdfunding website called buymeacoffee. com) was based in Glasgow when I made the payment. This payment description doesn’t mention who I was even donating to – it could certainly be improved to reduce the risk of a customer mistaking it for fraudulent behaviour.
By contrast, the transaction with thetrainline.com is unambiguous, and provides a reference number to follow up if necessary.
The most common single reason people file chargebacks (34%) is unknown transactions on their bank accounts. If these transactions are fraudulent, the chargeback is legitimate, in which case the chargeback system is serving its purpose.
But all too often, this isn’t the case – customers are just confused. Merchants can reduce this confusion by ensuring payment descriptions which appear on customers’ bank statements are clear. Misunderstandings here are a top main reason for incorrect chargebacks stemming from unrecognised transactions.
“One of the reasons cardholders often raise a dispute is because they don’t recognise a transaction on their statement or that app,” says Mark McMurtrie, an independent payments consultant.
“Some simple reasons for this might be a geographic one, the transaction appears for a certain city or town that they think they have never been to; the transaction may be flagged on their statement with a merchant name that they do not recognise; or, a third option is the merchant
name is abbreviated so much that it cannot be distinguished.”
The latter case, he says, goes hand in hand with the growing use of payment facilitators who represent multiple merchants using a single name.
Eaton adds: “The descriptions that describe what the payment was used for, if you log into your banking app, often you only see a portion of that description,” says Eaton. “And it’s very difficult to recognise.
“We need to advance our technology to keep up with the changing times, because up to 75% of these chargebacks are literally accidentally filed.”
So, we’ve dealt with upset customers and confused customers. Now, it’s time to deal with customers who lie.
Knowingly filing a chargeback for a transaction that wasn’t made by a fraudster is known as firstparty fraud, or friendly fraud.
Eaton posits that consumers who make a legitimate chargeback can become tempted, upon learning first-hand how easy the process is, to do it again
illegitimately. And, given that contesting a $100 chargeback can cost the merchant ten times that in legal fees, they’re usually getting away with it.
It can be all too easy for a customer to simply pretend a purchase didn’t arrive and file a chargeback.
“We’ve seen customers claiming that products are damaged, which means we have to spend the time checking through our systems and sending a replacement, with no evidence that the products are definitely damaged,” says Stevens.
“Likewise, we also have experienced people claiming that they simply haven’t received any coffee, when we know the coffee has been sent straight away after their order.”
There are also less blatant instances of friendly fraud. Perhaps a child bought hundreds of pounds more Fortnite add-ons than had been agreed. Or a teenager didn’t realise when using their parent’s credit card to pass an online age check that their bank statement would show a purchase from www.sexyschoolteachers. com. Feeling these instances beyond their control, a parent could just file a chargeback.
It’s still fraud, and since the pandemic it has been growing. Merchants have a right to be annoyed by it, and to demand solutions to it.
Eaton says that the philosophy among companies used to be to accept customers’ version of events and not contest chargebacks – but as the frequency of fraudulent chargebacks increases, and the bad behaviour becomes self-reinforcing, this philosophy is changing.
It’s against this backdrop that the world’s leading card payment providers, Visa and
Crystal, 33, from England, says she is sure these transactions from her bank statement are fine but can’t tell you exactly what they are.
She knows about chargebacks, and almost filed one once before realising the transaction she was concerned about had in fact been made by her.
“Most of the time it’s just about the transaction description or vendor description not matching what I thought,” she says.
Despite working in financial services, she was unaware that a chargeback costs a merchant more than the amount refunded. She would file one if she was “genuinely worried”.
Mastercard, have introduced new tools for tackling card-notpresent fraud and, specifically, friendly fraud. Mastercard has made a number of changes through its Mastercon Collaboration dispute management platform. Visa’s most recent first-party fraudrelated changes come through its Compelling Evidence 3.0 standard (CE3.0).
Under CE3.0, businesses can provide records of previous undisputed transactions, made using the same payment method, with a matching IP address or device ID. The transactions must be between 120 and 365 days old, and if the
IP address and device ID don’t match on all three transactions, the three must share an additional corroborating element, such as shipping address or account login.
“These changes are an important part of Visa’s strategy to fight all types of fraud across its network and protect businesses,” Visa told Payments Review.
“At the same time, Visa’s strong customer protection through its Zero Liability Policy means customers won’t be held responsible for unauthorised or fraudulent charges made with their Visa credentials. They could also get their money back when they genuinely don’t get what they have paid for, where the seller won’t refund.”
Visa said it’s too soon to share feedback it’s received on the implementation of CE3.0, which only went live in mid-April.
Mastercard’s anti-friendly fraud measures went live earlier. The company didn’t respond to requests for comment from Payments Review.
Sanjay Bibekar, director at PwC in London, said the impact of the changes is “yet to be seen”.
While McMurtie describes friendly fraud as akin to “digital shoplifting”, he adds that “it needs to be managed sensitively to respect that there may be issues of vulnerable customers where care needs to be taken”.
A chargeback on a significant deposit on a gambling website, for example, could be an indicator that a person has spent – and lost – more money than they can afford to, and is resorting to fraud to try to recoup their money or hide it from a loved one. Studies from around the world show that problem gamblers
are significantly more likely to commit suicide than the general population.
In addition, it’s important to contextualise the impact of friendly fraud. In the same report in which it estimated chargebacks will cost $1 billion in 2023, Mastercard said there is $5.9 billion of cardnot-present fraud taking place annually in the US alone.
It’s a similar story to out-ofwork benefit or disability benefit fraud. Lots of media attention falls on cases where people claim illegitimately because it’s emotive for taxpayers or, in this case, merchants. When you delve down into the figures, though, under-claiming is far more common and worth far more money – but receives far less attention.
While some consumers are taking advantage of the chargeback system, or unwittingly misusing it, there are many more people who, for whatever reason, do not avail themselves of their right to make chargebacks when they fall victim to fraud.
McMurtrie says friendly fraud is “an issue rather than the issue”.
“Fraud is a moving target. And I’ve always used the analogy of like a balloon, you squeeze in one place, it pops out another place. What we’re seeing is fraud always takes place at the easiest options.”
In recent times, the use of pre-dispute services has made disputing chargebacks easier. These are alerts sent to tell the merchant that a dispute has been raised between the cardholder and the card issuer (generally the cardholder’s bank).
This also provides an opportunity to update their fraud defences. If, for example, a customer’s account has made a large
amount of purchases and a pre-dispute has been raised, it can be an opportunity to hold other goods due to be shipped to that account, to prevent the impact of fraud worsening.
On the subject of the chargeback, it’s at this point that merchants have to act quickly, usually by either refunding the consumer to prevent the chargeback and associated cost, or sending the appropriate information to the payment processor to dispute the chargeback.
But while it’s in merchants’ interest to be on top of chargebacks, McMurtrie says they are actually the party with the most work to do to in this area.
“The stakeholders who are currently least advanced in the chargeback process are the merchants. Merchants still lack information about the chargeback process, and are reliant on the communications and tools that they are offered by their acquirer.”
Many merchants still use inefficient, paperbased systems or emailbased systems to file them. Given the advancement in technology, and the level of not just digitalisation, but automation present within other areas of the payments industry, relying on emails and spreadsheets to keep up with deadlines is borderline anachronistic.
Nowadays, merchants should be aiming to avail themselves of application programming interfaces (APIs) to integrate chargeback dispute management into their IT infrastructure and even automate parts of chargeback defence by leveraging other parts of their data.
But there are also offthe-shelf tools and systems available to help merchants to automate and improve their dispute management processes.
Given the complexity of the chargeback process, and the expertise, processes and vigilance required to deal with them efficiently, more and more merchants are deciding to outsource parts of the process to specialist service providers.
“There is a trend for issuers and acquirers to outsource elements of the chargeback process to specialists,” says McMurtie.
“What we have seen, is that the industry as a whole, there’s a lot of value-added services that are piggybacking on the chargeback pain point,” adds Eaton. “It’s very painful[…]. When you have a lot of pain, then it drives demand for more efficient solutions to avoid chargebacks altogether.”
Such service providers tend to work through
leveraging information from Ethoca and Verifi – which act as pre-dispute platforms for Mastercard and Visa, respectively – and overlaying their own technology and knowledge.
“When a chargeback happens, a consumer or their bank end up contacting the schemes with a disputed transaction,” says Eaton, whose company Chargebacks911 is an example of such specialist service providers.
“That transaction can flow through our platform to notify the acquiring bank. And then the acquiring bank notifies the merchant, the merchant decides either to challenge or contest the case and submit documentations or to accept liability on the case.
“We provide the technology that sits in the middle and
help automate all of the really messy workflows and cycles. And with chargebacks, there’s hundreds of different rules, compliance rules, every single region, every card type, every payment method has different rules and flows.”
McMurtie notes that not all merchants are going down this route – “some still maintain systems in-house” – but that the trend of outsourcing to external service providers is “accelerating”.
With an eye on the future, it’s worth mentioning that no chargeback-like mechanism currently exists for open banking.
“I think open banking will not be implemented by the mass of merchants until an effective dispute process is implemented in order to be
able to protect the merchant interest and the card holders interests,” says McMurtrie.
“That process should look to build from the learnings of the card payment chargeback process, but implement a cut-down version with less inefficiencies.”
However, PwC’s Bibekar has a different opinion. “Open banking is different and typically safer than card transactions, in a way that it relies on direct bank-to-bank transfers using APIs, requiring customer consent, hence the need for chargebacks will be limited,” he says.
Tony Craddock, founder and director general of The Payments Association, adds: “We want to see a chargeback mechanism, we want to see dispute resolution service that protects all open banking services stakeholders now.”
Hear host Jyoti Rambhai speak to Manish Garg from the Project Digital Currencies working group about the transformative world of tokenised deposits and the future of digital banking. Scan to listen now.
Dive deep into the evolution of banking and the potential of blockchain technology in this episode; learn:
• The difference between traditional and tokenised deposits.
• The potential impact on the UK economy.
• The role of CBDCs in global trade.
Companies spend £125 billion each year enabling people to pay and get paid securely, quickly and conveniently. The UK’s payment sector employs over 100,000 people from more than 500 companies.
“At a time when there’s a wave of innovation facing financial services, that innovation needs to be captured and harnessed by the right sort of regulation,” says Tony Craddock, founder and director general at The Payments Association.
This is why the trade body is launching its first ever manifesto, which aims to develop Britain’s payments industry into a world leader by fostering innovation within a competitive legislative framework.
The Payments Association has spent several months engaging with stakeholders to prepare what Craddock says is “the payments industry’s manifesto as represented by its members”.
The government has announced its intention to look at the payments industry through its Future of Payments Review and that it intends to make waves in the sector, as the UK’s reputation as a leader in this crucial area of financial services is beginning to wane.
The timing of the manifesto, following this announcement in July and party conference season in autumn, means there’s reason to believe it could come to be viewed as a highly influential document.
Leadership is a theme that runs throughout the manifesto. It’s important for the UK to assert a leadership position in payments, says Craddock, because this will help attract the most innovative companies, ambitious investors and capable entrepreneurs to our shores.
The value of being seen as a leader is evident, he says, in the success of the UK in attracting talent, organisations and investment into the fintech industry – which didn’t even really exist a decade ago. Financial services contributes 10% of the UK’s tax receipts.
Craddock concedes that there are risks to being a leader, and sometimes being a fast follower can be better, but that there is “something about financial services in the UK that typically goes very well together”.
“We have the talent, we have the investment environment. We have pretty early adopting consumers that are open to new things,” he says. “We have a sophisticated and mature regulator and regulatory development process.”
It’s important to take bold action now while the UK is still seen as an important country in the payments sphere, Craddock goes on to add, it has “gone off the boil a bit” in the past few years for various reasons.
The UK is starting to be left behind as payments innovation thrives in other countries such as China, Thailand, the Netherlands, Sweden and Brazil.
“We were, for example, the first country where Faster Payments was adopted,” he says. “We were the first country to adopt open banking standards across the industry. But there’s a fair number of examples of where perhaps other countries are starting to show the lead and we’d like to do something about that. We’d like to re-establish our lead.”
The manifesto covers seven key areas: financial crime, financial inclusion, open banking, finance and data, cross-border payments, environmental, social and governance (ESG), digital currencies, and regulation and compliance.
The manifesto’s aims and themes are interwoven across its headline areas. For example, the section on open
banking suggests supporting the Joint Regulatory Oversight Committee’s efforts in the space, while for financial crime, it is lobbying for the development and adoption of a digital passport for consumers and small businesses.
It also puts forward regulatory recommendations across financial crime, financial inclusion and digital currencies. This includes developing a “clear and balanced regulatory framework that supports innovation and competition of digital currencies, protects end users, enables financial inclusion and gives regulatory certainty to banks and PSPs”.
Most of the sections also push for the raising of standards or setting of new standards, to ensure the prosperity and functionality of the payments industry.
For this reason, it’s important to look at the whole manifesto, not just sections of it.
“The first thing to emphasise is that you can’t just do one bit of it. You can’t just look at open banking, for example and focus only on that,” says Craddock.
Craddock says that The Payments Association will be preparing
a cut-down version of the manifesto for the Conservative and Labour party conferences in the autumn, and attending both, encouraging the government and its possible successor to adopt its principles within their own manifestos.
“For something that is of such importance it’s always surprised me as to how the more influential institutions, the government, for example, and businesses seem to just take it for granted.”
The timing of the manifesto is ideal in terms of its potential to influence government, because of the Future of Payments Review.
Chancellor Jeremy Hunt, announced that the government is to carry out a review of the payments industry reflecting its importance, and the fact that it might be seen to be trailing from its competition.
There have been numerous stakeholders talking about this message, which has contributed to the government commissioning ex-Nationwide CEO Joe Garner to work on this over the summer and autumn.
“I want to make sure we remain at the forefront of payments technology, said Hunt on 10 July. “I am launching an independent review into the future of payments – led by Joe Garner – to help deliver the next generation of world class retail payments, including looking at mobile payments.
“We are laying new legislation to give regulators the powers they need to reform rules on innovative payments and fintech services, and, together with the Bank of England, we are exploring potential designs for the digital pound should we decide to introduce it.”
Craddock says: “It is so exciting for us, because we’ve actually been coming up with the answers over the last few months with this manifesto.
“What this allows us to do is to draw on the months’ worth of work and multiple levels of engagement, to go back to the government and say we know what we need to get a worldleading payments industry because we’ve asked our members and they told us.”
Craddock adds that The Payments Association is continuing to gather members’ feedback on the payments landscape, and is commissioning research on what’s happening globally in the sector, which it will share with the government.
The Payments Manifesto be will launched in mid-September. To read the full document go to thepaymentsassociation.org.
We have the talent, we have the investment environment. We have pretty early adopting consumers that are open to new things.”
We were the first country where Faster Payments was adopted. We were the first country to adopt opening banking standards across the industry.”
From working in different countries to tackling the sector’s diversity problem, Sundeep Kaur, regional leader for global financial services at AWS, speaks to Jyoti Rambhai about the trends and challenges in payments.
Tell us about your career path?
I grew up and I studied in India. After doing my BA and a short stint in a consulting firm, I got the opportunity to work at American Express in New York and that’s where my career in payments started.
At AmEx, I had the opportunity to be able to do different types of roles, working in different parts of the world, in different functions. I worked in strategy, operations, product, and then moved towards more commercial roles including sales and business development.
After that I moved to Travelex where I ran the cards business and was responsible for growing the business in different parts of the world, adding new product lines, new customer segments. I then joined Visa in a role that was
newly created to run a team and build relationships with the merchant customers in Europe, which was exciting.
And now I’m at AWS and I’ve been here for three years. I work with global financial services customers and help them transform their business or solve problems using AWS technology.
What challenges have you faced?
I like to seek professional challenges, that’s my motivating factor. I’ve worked in different functional areas, particularly in the early part of my career, such as product, operations, sales and business development.
And these are all very specialised skill sets. So, when you come into this new, there is a really steep learning curve. And that’s a challenge because you
must learn very quickly, and then very quickly, deliver and make an impact.
What are the biggest changes facing the payments industry? Payments is going through quite a transformational change at this point. If you look at what’s happening in the world around us there’s a lot of factors impacting payments.
Economically, we are going through a phase in many parts of the world where inflation rates and interest rates are higher than they’ve ever been. Geopolitically, there is a really strong focus on localisation and nationalisation. Technology is changing at a pace where modernisation is just something organisations have to do to adapt.
So with all of these
changes, the industry is going to be redefined. The revenue models for companies is going to change, the operating models is going to change, there’s going to be new players that will enter in a way that they haven’t before. Those are some pretty massive changes happening all at the same time.
If we look at the payments industry today, it is almost unrecognisable from two decades back, right. The
trends that have had an impact on the world and have had mass adoptions are the ones where they change customers lives for the better and the ones that bring more segments of people into the payment’s ecosystem, who didn’t have access before.
For example, what we are seeing happening in India with UPI or what happened in Kenya with the ability to pay through texts, these trends have continued to grow because it made lives easier for customers.
So if you look at that history as a learning curve for the future, the trends that will continue will be in the area of cross-border and instant payments, which is currently at a friction point. Real-time payments will be a big factor in the future as customers are expecting more and more of
that through disbursements and receiving funds.
I think it is taking these challenges, these really systemic changes that are happening in the economic and geopolitical models and in the technology sector and bringing them all together in a way that they can redefine business, rather than sticking to the old ways.
In the true spirit of what we call the payments ecosystem, I would like the larger players to work more co-operatively with the smaller players and the smaller players to adapt the standards of the larger players and regulators.
I’d also like the payments industry to be on the front foot in diversity of all kinds. A report published by McKenzie last year showed that the diversity of the financial services sector was generally subpar. While most segments of this sector is subpar in gender diversity, payments in particular was significantly under for entrylevel and early manger roles.
So I want the payments industry to make a deliberate and nuanced effort towards gender diversity. That means
for managers to ensure they have equal slate of candidates when hiring and promoting people for their work – especially women and individuals from ethnic minorities.
I have three pieces of advice.
1) Gain an understanding of the intersection of technology and money movement in payments. There’s so much good content available on this through reports and journals, so you can build that breadth of knowledge.
2) Get international or multi-country exposure. Payments happen very differently in developed and emerging markets. Being able to understand what’s happening outside of the country or geography we live and work in is really valuable experience. If you can’t, take an interest in how customers are paying when you travel.
3) Take an active role in helping this industry become more inclusive and more diverse. Everybody has a role in that.
In the true spirit of what we call the payments ecosystem, I would like the larger players to work more co-operatively with the smaller players and the smaller players to adapt the standards of the larger players and regulators.”
The PAY360 Awards, hosted by The Payments Association, celebrates innovation and collaboration in the world of payments by recognising companies for their achievements at the most prestigious event in the UK payments industry calendar.
Now in its sixteenth year, the awards cover 20 categories, which evolve each year to reflect the most important industry trends and are inclusive of emerging and established players across the payments landscape; ranging from banks to fintechs, payments service providers, merchants, and other ecosystem partners.
We are proud of our open nomination process, which is designed to attract the widest possible participation of entrants. This year we had over 300 nominations across 20 award categories.
We also take great pride in our independent judges, including 70 seasoned payments industry professionals, who strive to select the best of the best based upon each category’s criteria. Each judge focusses on scoring one to two categories within his or her area of expertise to ensure the right level of scrutiny and focus.
Following the shortlisting process, the judges for each category come together to debate the relative merits of the shortlisted candidates to determine the final winners. So, all winners –shortlist or final – should be extremely proud to be recognised through this thoughtful and high-integrity selection process by their industry peers.
This year, we also added the Lifetime Achievement Award to recognise an individual who has had a profound impact on the payments industry during his or her career. For this category, we had over 40 nominations, including leaders, writers, founders, investors, regulators, and other industry influencers.
The shortlisted Lifetime Achievement winners should all take pride in this honour. More importantly, they serve as inspiration to the next generation and demonstrate what is possible with passion and commitment.
We cannot wait to see the ‘movers and shakers’ – including more than 1,000 executives and leaders from across the payments value chain – come together to celebrate these winners. It’s a great way to catch up with our colleagues, partners and friends across the industry, while raising a glass to the winner.
The PAY360 Awards will take place on 4 October 2023 at JW Marriott Grosvenor House, London.
Best international payments, remittance or use of FX
• Corpay Cross-Border Solutions
• BlueSnap’s Global Payment Orchestration Platform
• Banking Circle
• Freemarket
• iGTB/ Intellect Payment Services Hub
• Remitly
Best financial inclusion payments initiative
• MFS Africa
• Crown Agents Bank and Centenary Bank
• Al-Amal Microfinance Bank (AMB)
• Paymentology
• Oxbury Bank Plc
Best consumer payments programme
• HyperJar – Helping consumers to spend life well
• Paysafe’s Digital Wallets
• Lloyds Banking Group – Loyalty Plus
• Edenred Payment Solutions and Sprive
• Netcetera – eCom Tokenizer
• Vaziva program with ID Distribution
Best B2B payments programme
• Swiipr Technologies – The global compensation solution
• BCB Group – BLINC
• Banking Circle
• JOOR Pay
• Amazon Business Pay by invoice
• Marqeta
Best open banking or finance initiative
• Yapily
• MTN and Ericsson
• Payit by NatWest
• Ozone API
• Brite Payments
• Moneyhub
Best partnership and collaborative initiative
• myPOS Glass
• Currencycloud, Visa, Tribe, eToro Partnership
• 2025 Fintech Pledge
• Moneyhub
• TechPassport ERQs
• Digital Flyer
Best B2B/B2C banking initiative
• Paymentology and Wio Bank
• N26 Brasil
• Transfermate – Global Accounts
• Maya
• Ibanq by IFX Payments
• BM Technologies (BMTX)
Best use of payments data or AI in financial services
• Banking Circle
• Caixa Geral de Depósitos – CAIXA Digital Assistant
• FIS – GetPaid
• FinScore
• HSBC, Mastercard B2B Analytics (MBA) powered by PayTech
• Exela Technologies – AI powered Confirmation of Payee solution
Most innovative mobile or financial service payments solution
• Clear Junction
• MiFinity
• HyperJar – Payments Innovations Driving a Save Now Buy Later Movement
• Lloyds Banking Group – Automated Disputes in App
• Payit and PayMe by NatWest
• DIGISEQ Ltd
Most innovative merchant services
• Izicap
• Bango Resale
• Fabrick – Payment Orchestra
• NatWest – Variable Recurring Payments (VRP)
• Williams Trade Supplies Ltd, Payit and PayByLink
• Maya Business All-in-One Solution
Best financial crime prevention solution
• NatWest
• Onfido Real Identity Platform
• PREDIMYA / BFORE.AI – Precrime
• Accertify SCA Optimisation
• SEON
• Visa Risk Manager
Best regtech project
• tell.money and Modulr
• smartKYC
• Bottomline – Confirmation of Payee
• Salt Edge
• Lucinity and Pleo
• Know Your Customer & ONE Group
Best customer facing experience
• Vyne
• HyperJar – Helping Customers to Spend Life Well
• Lloyds Banking Group – Subscriptions Manager
• Lloyds Banking Group – Automated Disputes In App
• Intellect iGTB – Contextual Banking eXperience
• Swiipr Technologies – Travel Compensation Experience
Leading financial services or payments start-up
• Kipp
• Fyorin
• StarLiX
• ESTHER International
• Algbra
Best direct account-to-account solution
• Token
• Lloyds Bank – PayMe
• Banked _ Pay by Bank
• Brite Payments
Best lending initiative
• Arf: Credit Line
• Yabx Technologies
• Nexo
• ACI Worldwide
• Newpay
• Credit Key
Best ESG initiative in payments
• easypaisa and Ericsson
• EcoCash and Comviva
• ecolytiq
• Algbra
• Edenred Payment Solutions and ekko
• Giesecke+Devrient, The Mutual Bank
Leading emerging payments organisation
• Imburse Payments
• The uP Platform by NomuPay
• Emergo UK
• ESTHER International
• Paymentology
• Optimus Cards UK Limited
Best technology infrastructure for blockchain
• Billon Group Ltd
• Fireblocks
• Criptan
• Baanx Group Ltd
• W2 powered by nChain
• ARYZE
Best use of digital currencies/assets in financial services
• BCB Group
• Ripple
• IDEMIA
• Arf
• BVNK
• Maya
Do.Better.Together: Best D&I initiative
• Paysafe
• Ozone API
• Women of Fintech
• Tesco Bank – Hot@Tesco menopause support
Lifetime achievement award
• Dan McCrum, investigative reporter, Financial Times
• Maha El Dimachki, head of early and high growth oversight, Financial Conduct Authority
• Chris Skinner, author and commentator
• Kristo Käärmann, CEO and co-founder, Wise
• Monica Eaton, CEO and founder, Chargebacks911 and Fi911
• Chris Adelsbach, fintech angel investor
Open-source software (OSS) has arrived in the world of payments. Roberto Rivero explains the benefits of OSS over in-house developments and commercial (or closed source) software.
This year’s Money20/20 Europe witnessed the arrival of OSS to the world of payments.
According to Wikipedia, OSS is “computer software that is released under a license in which the copyright holder grants users the rights to use, study, change, and distribute the software and its source code to anyone and for any purpose”. This means the software is distributed with source code that anyone can see and change, within the limitations of the license.
Often (but not always), OSS will be developed and maintained by its user community in a collaborative way, with contributors making their work available freely to others.
The use of OSS is not new and is responsible for bringing about some of the most revolutionary products in the technology industry, including Apache, Mozilla Firefox, the Linux operating system and even Google’s Chrome.
Using OSS can bring amazing benefits, including cost and time savings, transparency, security, control, and much more.
The most obvious benefit of OSS is, of course, that it is usually free. Futhermore, when OSS is open to collaboration, finding and fixing problems is, to a large extent, outsourced to the community and the costs of maintenance are either shared, or received for free. However, this is not the only advantage. Very often, it’s not even the most important one.
The second most obvious benefit is that OSS will save you time. Even if what is available for free does not do everything you need, it will likely give you a huge jump start in your own development journey.
Getting your new product to market sooner or freeing your own resources to work on something else earlier than would otherwise be the case, are frequently much more important than
When two vibrant technology sectors
Crucially, the life and ongoing usefulness of OSS is not dependent on the health or activity of the company that created it. Even if the creating organisation ceases to exist, the software can continue to live and evolve in useful ways.”
saving money. This means the time saving aspect of OSS is frequently its most valuable feature.
More importantly, it creates a sense of belonging and community. When OSS is open to contribution, this can propel thousands of skilled programmers around the world to improve the software and make it faster, safer and better –benefiting countless other developers and, in turn, their software users.
OSS can, therefore, be more reliable than commercial software because it often has thousands of programmers with a wide variety of requirements using it, testing it and fixing problems they encounter.
Unlike most commercial options, OSS allows you to look at the source code yourself and determine whether it is of good quality or not, making it significantly more transparent than commercial software.
Apart from helping you to determine the quality of the software, this opacity
vs transparency issue also impacts security. Perhaps counterintuitively, fans of OSS strongly believe that the fact that the source code has had thousands of skilled eyes on it, means that it is much less likely to include security vulnerabilities.
In addition, compared to commercial software, OSS gives you a much greater degree of control. Users can scrutinise the code and change the parts they don’t like or add functionality where they need it. This agility means using OSS instead of commercial software can enable an organisation to react more quickly to new requirements. It eliminates the barrier of waiting for your supplier to understand, prioritise and deliver the features you need – you can develop them yourself.
Crucially, the life and ongoing usefulness of OSS is not dependent on the health or activity of the company that created it. Even if the creating organisation ceases to exist, the software can continue to live and evolve in useful ways.
OSS in the payments space OSS brings with it a long list of fabulous practical benefits to developers, companies and, once implemented, to their customers.
We are excited about the arrival of OSS to another vibrant corner of the technology industry – payments – and
fervently believe that their combination will accelerate innovation and increase the value add provided by our industry. But how?
Here are three examples of its likely impact:
• OSS will reduce the amount of time it takes to develop new solutions, literally, from months to weeks.
• By freeing programmers from having to invest time in generic, repetitive developments, it will allow them to focus more time on the unique areas of their products – on their real differentiations and on features with a high value-add.
• OSS will reduce the time to develop MVPs to, literally, days. This will make it easier to raise money from investors and accelerate the time to reach revenue generation.
In short, the ‘head start’ provided by OSS will reduce risks and up-front costs – and accelerate revenue generation.
Roberto Rivero is advisor at Lerex Technology.
Open-source software can be more reliable than commercial software because it has thousands of programmers using it, testing it and fixing problems they encounter.”
Join us for a morning full of product inspiration, shaped by your own questions, as we explore the dynamic changes and emerging trends shaping the payments industry.
Tuesday 26 September 2023
08:15 - 10:00 BST
De Vere Grand Connaught Rooms, London
Senior product professionals within the payments space - Members only
Bringing together payments professionals for special peer-to-peer insights and advisory session
For c-suite professions: The challenges and impact the new government guidance is having on digital assets.
Thursday 19 October 14:30 – 15:30 BST | Online
The current economic climate is making first-party fraud – also known as friendly fraud – more appealing to those struggling financially. Sarah Jordan and Stephanie Kattah examine the challenges facing businesses and merchants in tackling this crime.
One in seven UK adults admitted to participating in firstparty fraud (FPF), according to research by Cifas; while figures from the National Fraud Database showed an 18% increase in FPF within the first nine months of 2021.
FPF is when a customer commits a deceptive act by taking advantage of their role and rights within the payment ecosystem.
The current cost-of-living crisis and high inflation rates have further driven customers to succumbing to either committing fraud themselves or becoming easily manipulated by others.
There is concern that the upcoming Payment Systems Regulator’s (PSR) authorised push payments (APP) fraud reimbursement requirement may also lead to a further rise in FPF as customers may take advantage of the chargeback protections provided to them.
We have spoken with firms across the payment’s ecosystem including merchants, acquirers, card schemes and issuers, to find out some of the FPF challenges and best practice regarding support from firms in tackling this issue.
FPF occurs when a person knowingly misrepresents their identity or gives false information for financial or material gain. FPF can take many forms, common types include:
• Chargeback fraud: Also known as friendly fraud, this takes place when a customer requests a refund regarding a transaction for an item or service that they claim they have not received or is not as expected. However, it is a legitimate payment made by the customer who intends to keep the item or service without payment.
• Refund fraud: Occurs when customers return allegedly broken, stolen, or counterfeit items in exchange for a refund.
• Application fraud: Takes place when a customer provides false information regarding their personal details, such as their level of income, to gain a more favourable outcome on a loan or credit line.
• De-shopping: When a customer buys an item, uses it, and then returns it as if unused to the merchant for a refund.
Although customers may believe what they are doing is harmless, it is fraud and the impact on firms across the payments ecosystem is increasing.
The pandemic exacerbated the issue as stores were forced to close and retailers needed to differentiate online by making delivery and returns a simple part of the customer experience.
Retailers experienced 70% more monthly fraud attempts during the 2020 lockdown in comparison to previous years, according to finance online. Merchants tell us their industry is still greatly impacted by FPF, with trends in customers reporting false chargebacks and disputes.
The hardest fraud to capture or prove is that committed by the customer, especially if they have a history of good behaviour and creditworthiness.
FPF moves the burden of proof to the merchant and away from the customer raising the claim. Merchants are currently required to cover loss of inventory costs for fraudsters who are successful when they falsely claim a chargeback or refund on an item or service they received.
Due to the challenges in proving FPF, in addition to providing proof to card issuers, a merchant may need to meet differing scheme standards to prove a chargeback or dispute, therefore fraud figures quoted are said to be ‘the tip of the iceberg’
According to the Merchant Risk Council’s 2023 report, more than one-third of merchants experience first-party misuse or friendly fraud, with enterprises, in particular, seeing a significant spike in this activity.
Because of the cost firms incur trying to prove FPF, some have simply had to accept a level of fraudulent activity and unfortunately the fraudsters know that and will move around merchants making similar claims.
Therefore, the real level of FPF is much higher than reported and there is a risk that smaller merchants that do not have the resources to invest in fraud detection and prevention tools are disproportionately impacted.
Firms now find they need to balance the risk of fraud with their customer experience. This is because genuine customers may feel strained in their relationship with the organisation if they become subject to the increased checks and scrutiny when they need a legitimate refund or require a chargeback.
Furthermore, businesses that are targets for FPF have an increased risk perception to merchant acquirers resulting in them charging a higher fee for their services.
Simultaneously, organisations are evolving in their platforms and technology to remain on top of the market and enhance their customer journey with the aim to improve business.
The demand for onboarding and increased usage of simplified due diligence or outsourced onboarding are ways in which the payments ecosystem is evolving. In 2021 we saw the total number of payments return to pre-pandemic levels and a return towards the long-run trends in payment method usage.
Contactless continued to be popular, accounting for almost a third of all payments, insights from UK Finance showed. Evolving systems, policies and technology across the ecosystem may lead to manipulation by criminals to commit FPF as processes become simpler and fraudsters develop their own techniques to exploit vulnerabilities and weaknesses in internal processes and systems.
The PSR published a policy statement in June (2023) setting out a new reimbursement requirement for APP fraud that applies where payments are executed over the Faster Payment System with some exceptions. Exceptions include FPF or where victims have acted with gross negligence and in these cases, reimbursement will not apply.
A further PSR consultation is expected to provide guidance on gross negligence. With an expectation that reimbursement mechanisms are put in place and as customers become increasingly aware of their right to reimbursement in the case of APP, there is risk that customers will falsely allege APP fraud to seek reimbursement.
This customer behaviour is expected to be driven by the same factors we see today in the fight against FPF: the ease of claiming, the current economic climate, and the burden of proof challenge for firms. In the event this risk crystallises as expected, it will be another contributing factor to increasing levels of FPF we are seeing across the payment’s ecosystem.
One in seven UK adults admitted to participating in first-party fraud (FPF), according to research by Cifas; while figures from the National Fraud Database showed an 18% increase in FPF within the first nine months of 2021.”
FPF is unique in nature and can be unpredictable in cases but there are steps that can be taken to prevent, detect and respond to this threat. This comprises strong controls, processes, intelligence sharing and customer education.
Initial screening and verification tools at the customer onboarding stage are crucial in identifying suspicious behaviour early and authenticating customer identities to identify the risk of fraudulent accounts.
Data analytics and artificial intelligence (AI) can be used to determine trends and anomalies. A robust AI enabled rule management system is also required to detect suspicious or unusual transactional behaviour by analysing loss trends and continually updating thresholds to ensure fraudsters have difficulty in avoiding rules, while maintaining low false positive rates to minimise genuine customer impact. Customers who have repeat claims for example, can be an indicator of FPF.
Communication through customer education, raising public awareness and internal employee training can also educate parties about the types of FPF, how potential risks can be identified and prevented, raise awareness of trends, and highlight the consequences of committing such criminal act.
In addition, there are other industries that can be learnt from, for example, nudge theory, which has been tried and tested in the insurance industry for some time.
Nudge theory is a technique whereby the customer is reminded of the importance of being truthful upfront during the client relationship and gently highlights the implications of being caught committing fraud to deter clients from FPF.
It is proven to encourage customers to make good decisions when their moral compass is being swayed due to financial struggles. For example, many banks also utilise challenge teams for fraud cases where spurious transactions are added to a claim.
Finally, intelligence sharing and a combined effort across industry to tackle the problem will help to reduce it. There are various forums where information has been shared on FPF between merchants, acquirers and issuers.
However these are largely informal and do not bring together the various ecosystem role holders to create a holistic view and approach to managing the risk.
CIFAs and UK Finance are organisations that provide cross-sector collaboration, and the industry could utilise them to tackle the issue holistically, such as with cross payment industry sessions.
A coordinated effort bringing together firms within the payments ecosystem and include reviewing standards and rules so that the nuance of FPF can be used to better manage the risks and encourage consistency of criteria for proving it. Intelligence sharing mechanisms can also be used across institutions of those customers with a record of claiming refunds and chargebacks.
What’s next
Increased distant selling, increased players in the payments chain, and a regulatory focus on consumer outcomes has created the perfect storm for FPF.
Furthermore, within an era of advanced technology, firms need to be prepared for the equally sophisticated techniques used by fraudsters to prevent financial losses, reputational damage, and increased regulatory liability.
Our combined industry and client experience allows us to conclude that understanding the behaviours of FPF and implementing a robust prevention, detection, and response fraud management framework, including robust controls, customer education, and intelligence sharing, across the payments ecosystem will collectively strengthen an organisation’s defence against such deceptive acts.
With the upcoming PSR fraud reimbursement requirement for APP adding further challenges, it’s important the industry acts now to address this growing risk.
Retailers experienced 70% more monthly fraud attempts during the 2020 lockdown in comparison to previous years.”
Chargebacks911’s Monica Eaton examines five ways how businesses can utilise bots and new technology to drive sales online.
Conversational commerce is one of the hottest marketing topics in recent years, and with good reason.
There is a lot to be excited about here.
In basic terms, conversational commerce covers any eCommerce conducted through a conversational channel. This can include live chat, as well as AI-powered technologies like voice assistants and chatbots
Conversational technologies are especially valuable to marketers when it comes to reaching those highly-coveted millennial and gen-z consumers. In response, app makers are sending signals that conversational commerce will only grow in coming years.
However, simply deploying bots is not enough to convince consumers to complete a purchase. The process should be optimised before it can be effective. By adopting the following best practices, merchants — and the payment service providers that work alongside them — can help ensure that they’re making the most of these new opportunities to reach consumers.
1
Understand the nature of conversational commerce
First, it’s essential to understand that
conversational commerce is not one distinct trend. Instead, what we call ‘conversational commerce’ is several simultaneous market trends converging at the same time.
Widespread use of messaging apps like WhatsApp, Facebook Messenger, and WeChat; advances in AI chat technology; and a desire for greater intra-platform functionality, are all components of conversational commerce.
While they overlap in many regards, each trend is ultimately distinct and calls for a unique approach to maximise one’s efforts.
SMS and push messages, which proactively reach out to consumers, can be part of the retention process. At the same time, both AI-powered chatbots and old-fashioned, human-based chat functionality can also play a role in guiding shoppers through the stages of the buying process.
Sellers can’t simply rely on AI and bots or automated advance notifications for
all interactions. Trying to understand conversational commerce as one consistent idea, and applying one consistent approach in response, will lead to most of one’s efforts being wasted.
2
Know your customer
Conversational commerce is a great way to expand into new markets. It can help reach consumers who may not be responsive to more traditional advertising. To achieve this though, it’s necessary to have some insight into who one’s customer is, from a demographic standpoint.
Not all consumers use the same apps for communication. If you’re trying to reach a specific segment of the population, whether that’s based on location, age, or interest, demographic data can offer some valuable insight on the matter. For example, while Facebook Messenger is widely-used in the US, WeChat is overwhelmingly
preferred by Chinese consumers. If one is looking to reach out to younger consumers, then platforms like TikTok would be the best method, while older millennials tend to spend more time on Facebook and Instagram
Sellers can’t expect to communicate with all people equally well using a static approach. They need to clearly identify who they’re trying to reach, then select the platform and methodology which best reflects that consumer.
3
Know your content
Alright: you’re a retailer, and you’ve identified your consumer, as well as the platform on which you will be most effective at reaching those individuals. Now, it’s time to identify the brand of content which will best engage them.
Again, different subsets of the population respond to different forms of content.
When one deploys bots or other AI technologies, they are only capable of mimicking what they see.”
When looking to reach gen-z consumers, for instance, it’s important to know that these people engage most with video content. In contrast, older professionals in their 30s and 40s typically prefer written articles
It doesn’t really matter how hard one pushes a piece of content if they’re not pushing the kind of content that the target audience cares to see. It’s vital for businesses to do the research, know how customers respond to their material, and tailor the content to spark a conversation with the buyer, rather than trying to select buyers to fit the content.
4
Teach your technologies well
AI is an amazing technology that has the potential to reshape how we approach commerce from the ground up. We need to have some perspective, though. Remember, when one deploys bots or other AI technologies, they are only capable of mimicking what they see.
It’s essential to remember that AI is capable of imitating intelligence, but not actually developing it (at least not yet). It needs constant guidance and refinement.
Sellers must ensure that the voice these applications present to the public is an accurate and positive representation of their brand, and that it’s conversing with shoppers in the right way.
One absolutely cannot set these technologies loose on the public without first preparing them to act accordingly. They need to be able to make the right recommendations and responses to best represent the company’s brand. It could cause sustained problems if you set a pattern that’s not rooted in customer service best practices Even worse, the situation could devolve into a PR disaster
After one begins to deploy tools for conversational commerce, it’s essential that they keep tabs on the rollout and ensure that they function properly, and that they are reflecting well on your brand. Promote these tools’ use, and constantly examine customer feedback and use it to make adjustments as the process goes to better address customers’ expectations.
5
consumer to fulfil a specific urge. Whether that need is for information or for a product, being able to satisfy the customer’s need in the moment it develops is what matters.
In a successfully leveraged micro-moment, a customer moves through three different phases:
• I want to know.
• I want to do.
• I want to buy.
converts them.
As mobile marketing grows more dominant as a sales channel and AI technology becomes more sophisticated, we should expect to see much more conversational commerce in the coming years. By leveraging the technology effectively now, sellers can set up your business for greater long-term success.
Incorporate
Mobile marketing is dominated by micro-moments. These are the reactive, instantaneous needs felt on the part of a
The key here is to provide the stellar level of content which draws in the customer, then back that content with welldeveloped conversational technologies to further engage the consumer. The content draws the consumer’s interest, then the engagement
Answer Pay’s Peter Cornforth examines the significance of Request to Pay alongside CoP, highlighting their combined role in meeting regulatory demands and fortifying payment security.
In today’s ever-evolving digital payments landscape, security stands as a paramount concern for retail banks and Payment Service Providers (PSPs). Regulatory requirements, including the UK Payment Systems Regulator’s mandates on reimbursements, have necessitated stronger security measures.
While confirmation of payee (CoP) has been widely implemented as an essential anti-virus measure, the time has come to ensure that Request to Pay is in place as a vital payment firewall filtering out fraudulent payees.
The regulatory shift Regulatory mandates, such as the Payment Systems Regulator’s requirements on reimbursements, has prompted retail banks to re-evaluate their approach to payment security.
Recognising the limitations of consumer-led validation, banks now bear the responsibility of payment request validation. As banks adapt to this shift, the need for robust security measures, including Request to Pay, becomes imperative.
The synergy of Request to Pay and CoP CoP has become a standard security measure, acting as an essential anti-virus component in the payment ecosystem.
By verifying payee information post-authorisation, CoP detects and prevents mismatches and potential fraudulent activity. Its implementation has
been crucial in safeguarding payment transactions and protecting customers from fraudulent transactions.
To bolster the security framework, Answer Pay’s Request to Pay proposition introduces the Payment Firewall as a vital complement to CoP.
While CoP serves as an essential anti-virus measure, the Payment Firewall acts as the firewall itself. It validates payee identities prior to payment request authorisation, fortifying the first line of defence against unauthorised access and fraudulent activities.
By ensuring that only verified and trusted payee information enters the payment systems, Request to Pay significantly reduces the risk of fraudulent transactions.
The combined implementation of Request to Pay and CoP within your banking infrastructure ensures a multilayered security approach. This integration empowers banks to take full ownership of the payment request validation process and deliver a robust security infrastructure.
By implementing both CoP and Request to Pay, banks demonstrate their commitment to providing a secure payment environment. Customers can
trust that their payment requests undergo rigorous validation, protecting them from potentially fraudulent activities.
The enhanced security measures not only shield customers from financial losses but also foster trust, building stronger relationships and promoting customer loyalty.
In response to evolving regulatory requirements and the need for heightened payment security, retail banks and PSPs must adopt robust measures.
While CoP serves as an crucial antivirus measure, the Payment Firewall within Answer Pay’s Request to Pay proposition ensures comprehensive protection. Together, these components fortify the security infrastructure, empowering banks to validate payment requests and mitigate fraud effectively.
By embracing this combined approach, banks foster trust, instil customer confidence, and contribute to a secure future for digital payments.
This article was originally on Payments:Unpacked from Mike Chambers – subscribe at paymentsunpacked.com
