Real-time compliance is the future of banking and payments as it can be achieved by using it as a tool for regulatory compliance. Read here to learn about its impacts on PSPs.
For Payment Service Providers (PSPs), adopting real-time technology enables them to not just keep up with compliance changes but also unlock new business opportunities through more sophisticated data capture, better personalization, and increased speed of customer onboarding. Real-time payments (RTP) is a suite of services that allows merchants to accept card payments in real time rather than waiting for batch processing by their acquirer or processor. The result? A quicker settlement for the merchant and less risk exposure for both parties involved.
Real-Time Payments (RTP) are defined as “real-time funds transfers made between two accounts that are directly linked within the payment system, which means funds can be transferred from one account to another without the need to wait until the end of the day or any other predetermined period.”
Real-time compliance is, therefore, the future of banking and payments. What will it mean for payment service providers? Let’s find out.
The greater good of your payment processor is to ensure that your company is compliant with regulations. It’s an obligation that cannot be ignored, as it can lead to fines and reputational damage. The State of IT and Cyber Risk Management Report found that over 40% of the respondents plan to invest in compliance-based solutions. But how does real-time compliance impact the way you run your business?
You may already know that there’s a trade-off between business needs and IT capabilities when choosing a payment processor for your organization. The right technology for your business will depend on both its current needs and its ability to handle more complex processes. If your organization has little experience in managing payments, it’s unlikely you’ll be able to handle complex processes from day one (such as real-time monitoring). However, if you have an experienced team working with complex data, they might be able to handle these tasks without any problems.
In order for real-time compliance to work, payments have to be instant so that the company knows if someone has overpaid or underpaid for something. Sales data visibility is a challenge for payment service providers because it’s scattered across multiple systems and often not available in real time. The data is also not always accurate, not always available, and sometimes not current. Out of the businesses surveyed, 45% have highlighted the challenge of preventing cyber risks due to a lack of visibility. With full information on sales data at your fingertips, you can quickly identify problems and address them before they cost you money. This will help keep your merchant accounts healthy so that you don’t need to constantly worry about revenue loss due to chargebacks or poor customer satisfaction ratings.
The financial services industry has been the biggest adopter of real-time technology. The benefits of real-time technology are numerous and include increased speed, efficiency, cost savings, and customer experience improvements. Real-time compliance can be achieved by using it as a tool for regulatory compliance.
Blockchain technology is a distributed database that keeps a growing list of records. Each block contains the hash of its previous block, along with data and additional information such as timestamps. A blockchain contains both transactions and programmable code to create more functionality from its basic functionality as a simple distributed ledger. Blockchain technology can help service providers maintain compliance with regulations by providing an immutable record for regulators to examine when needed. Since compliance does not equal security, PSPs need a robust infrastructure such as DLT to protect their customers.
For payment service providers, maintaining compliance in a real-time setting is a challenge, which requires investing in a strong IT infrastructure. The investment is worth it as the future of payments is in real-time, and you need to stay competitive with your peers as 70% of businesses expect an increase in the focus on managing regulatory risk. Your customers will also appreciate it when they’re able to make payments faster, more efficiently, and without having to worry about whether their information is secure. There are platforms available that use compliance-as-code to continuously and automatedly monitor configurations to keep up in the cloud-based payments ecosystem.
With the advent of real-time compliance, payment service providers are developing innovative ways to help customers create additional revenue streams as well as avoid transactions that could put them at risk of fines. This technology is transforming the way businesses operate, making it easier than ever before for companies to ensure their transactions comply with industry regulations. We’re excited to see what happens next.
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