Why Digitally Native Payment Service & E-Money Firms Are Primed To Adopt Technology Solutions For Regulatory Compliance
The payments industry continues to grow significantly, with transaction volumes increasing by 15% in 2023, card payments accounting for 76% of all transactions, while the Faster Payment Service has become the dominant payment method in the UK.?
The exponential rise of smartphone-enabled e-commerce, customer demand for speed and convenience, and the adoption of contactless payments have led to the emergence of FinTechs, which have, to date, focused on superior user experience, cost control, and seamless service, thereby reducing friction for customers.
In a crowded market, and with low barriers to entry, Payment Firms compete not only with one another but also challenge established players in the industry, including banks, startups, and tech giants moving into the sector. To date, such companies have been willing to operate at a loss as they push to grow their market share, adapting quickly to change, innovating with scalable technology, and benefitting from relatively light-touch regulation.?
A shift in regulatory scrutiny has been evident within the industry for some time now, embodied by the frequency and content of various FCA Dear CEO Letters addressed to the sector, the introduction of Consumer Duty, and most recently the CP24/20 "Changes to the Safeguarding Regime for Payments and E-Money Firms."
Payment and E-Money firms are accustomed to seizing innovative technology. They should use the same approach when navigating regulatory hurdles and the burden this places on firms from a cost and resource perspective.
Payment firms recognise the advantages of using digital solutions, particularly in risk management, regulatory compliance, and reconciliations. In these areas, digitally native firms can quickly adopt and integrate technology to scale their business efficiently, minimize cost, and reduce regulatory non-compliance while focusing on the all-important end-user experience.?
The forthcoming updates to the CASS regime should be seen as a positive change in the industry, primarily by enhancing consumer trust. With many firms offering similar products, customers tend to make choices based on trust, price, and overall experience. Regulatory technology can play a crucial role in differentiating firms from their peers and helping customers select the right firm in a crowded market. Firms should consider how best to adopt emerging technology that reassures customers that their transactions will go through smoothly and that their funds are safe.
Grath’s integrated GRC & Reconciliation solutions are already empowering Payment Services & E-Money firms, instilling a sense of confidence and security, to meet these stringent requirements by enhancing oversight, streamlining operational and regulatory processes, as well as automating ownership and accountability to save time, improve accuracy, and strengthen audit readiness.
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