Instant payments have become the norm for consumers and businesses, with more than three-quarters of merchants saying they expect that real-time payments will eventually replace physical payment cards. Digital payments are expected to hit $6.6 trillion this year, and consumer expectations around digital payments are tethered to speed, convenience, and security.
Even as digital payments thrive, they come with a unique set of challenges. Slow processing times and dragging compliance checks are the norm, especially for organizations still hamstrung by legacy systems. To meet the growing demand for speedy payments, many payments organizations, banks, and other financial institutions (FIs) are leveraging cloud technology and APIs for middleware backends while customizing the customer experience on the front end. Using APIs for real-time connections can enable instant payments rather than the traditional daily or weekly batch processes of yore.
There are other ways that cloud technology supports faster payments, ranging from more efficient data processing to more effective (and efficient) fraud detection and prevention. We explore some of those in greater detail below.
Automate Compliance & Security
FIs and payments companies are not a stranger to the burden of compliance. Oversight laws like know-your-customer (KYC) regulations and anti-money laundering (AML) require vast data collection, which can lead to a sluggish compliance process. Noncompliance is a nonstarter, as failure to comply not only leaves organizations and their customers vulnerable to fraudsters and the subsequent reputational fallout, but it is also expensive. FIs experienced fines upwards of $17 billion in the decade ending in 2019 due to improper AML procedures.
Automating compliance not only ensures that regulatory procedures are compliant, but it also enhances the speed at which security checks can be performed — especially in comparison to the time it takes humans to process those same checks. Cloud-native solutions leverage API architecture to render flexibility and automation in managing compliance. Organizations can automate and streamline all the elements of security and compliance, including monitoring, security and compliance checks, deep analysis of threats and vulnerabilities, and remediation.
Unlock the Power of Big Data
Legacy systems create data silos, making it difficult to sift through and utilize growing volumes of market data and alternative data sets. Leveraging serverless data platforms, machine learning, and open APIs will be the key to making full use of data for decision making. Data is integral to fast, secure digital payments, whether it’s being used to personalize the customer experience, enhance security, or comply with regulatory requirements.
Cloud-based machine learning solutions can aid transaction monitoring and the creation of improved models. Not only can this monitoring help with real-time decisions around credit risk, but it can also streamline data-driven processes organization-wide. More efficient data processing and analysis make data more readily available and accessible by business users, allowing them to create customized, user-friendly reports that can be seamlessly integrated with third-party visualization tools to analyze and solve data problems.
Real-Time Fraud Risk Analysis, Prevention, and Detection
FIs and payment services providers can use predictive cloud technology to run real-time fraud risk analyses and prevent fraud, cyber breaches, and other risks. Machine-learning-based fraud prevention platforms can simplify and speed up fraud detection and prevention as they identify emerging fraud patterns and correlations in real-time.
What’s more, machine learning facilitates more accurate fraud detection via data lakes that can support identity authentication. Machine learning tools paired with optimized fraud detection algorithms allow payments organizations to amp up fraud protections without increasing false positives. These fast and accurate fraud decisions guard against bad actors and improve the customer experience by removing unnecessary friction.
This goes hand-in-hand with the ability to automate dispute resolutions. With the proliferation of digital payments comes an increase in chargebacks. In many cases, chargebacks are legitimate requests. However, some chargebacks equate to fraud, where a consumer uses the chargeback mechanism to avoid paying for a product or service. Automating chargeback systems enables both merchants and payments organizations the ability to gather customer data from multiple sources and use machine learning to prove or disprove the legitimacy of a chargeback.
Cloud technologies are the way of the future for payments — and it begins now. As connected devices become ubiquitous and customer data flows in from every direction, cloud technology paired with artificial intelligence and machine learning capabilities hold the keys to the faster payments kingdom. The cloud can help reduce operational costs while improving efficiency, making it an ideal alternative to on-premise environments. Cloud technology paired with big data also gives payments companies greater insights into their customers, allowing them to develop highly personalized payment options that will be critical to compete in a growing marketplace.
