Data Protection Watchdogs Round on Facebook Libra Currency

Facebook Libra Currency

The bucking of the process order here concerns me greatly. Any other business, company and/or industry has a process to follow. This process that should be followed is that the company involved must establish its business plan and business and with that it must complete an application and with that approach the appropriate licensing authorities, regulators and/or government agencies in the jurisdiction in which they intend to operate and apply for appropriate registration, regulation and/or licensing.

What has happened here? Has this already happened here? The licences have been progressed and this is now a response to those applications? I doubt it.

It would seem that the data protection people have seen this announcement and are either a) Afeared that these people are going to go ahead without and of this compliance and outside the law of all jurisdictions including tax authorities! OR b) That the data protection people want to help fast-track the processes.

Either way: I am worried and so should everyone else be – that these people are getting privileged access to regulatory time when they do not pay for it through taxes: or that our regulators should feel the need to be so proactive.

Bill Trueman is a leading payment, risk & fraud specialist who provide payment fraud prevention consultancy services to card issuers, banks, and business organizations worldwide. For more information one can visit his website at RiskSkill, apart from this he is also joint chief executive of AIRFA.

To Read More Visit Source Article: https://www.finextra.com/newsarticle/34211/data-protection-watchdogs-round-on-libra

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Facebook Libra Currency – A Serious Threat to Global Banking System?

facebook libra currency

On Facebook’s Libra Currency : “I agree with Donald Trump’s Stand”

It is not often that I feel like agreeing with a world leader / game-show host; but I do. But only on the threatened introduction and launch of the Facebook Libra currency.

Payments are complex and there is a huge need for supervision and regulation. Especially, when things start to get challenging or when they go wrong. Our work, involves helping companies to do the right things, so we know just how tough this can be for every company, irrespective of experience.

So, we should all agree with Donald Trump (a shudder here), and for a couple of key reasons we must all make sure that payments and Banking are performed correctly and legally and appropriately licensed and to properly governed organisations to avoid:

A. An ‘Idiocracy’ future – with Facebook et. al.

B. The Tax / Government issues

Idiocracy

In the 2006 film ‘Idiocracy’ – ‘Joe’ is transported to a dumbed-down future, where the President of the USA doesn’t read or write – and influence stems from a ‘fizzy drinks’ maker and TV game-shows. Should we really cede control to social media companies?

The companies behind Libra, that form the Libra Association , are giants in their own industries . They wipe-out competitors, and direct our lives with their products/ services. As citizens, are we happy for this Facebook-led association of big business to develop and deploy a crypto-currency using blockchain distributed ledger for its rails. Do we want them to harvest all of our shopping and payments information. Do we want them to collect more ‘lifestyle data’, which they will inevitably sell to others with or without our permission?

We know who run these ‘Libra’ companies, but should we worry that they have complex global corporate structures that collect, lose, sell, and abuse our data today, avoid paying taxes, and evade government enquiries. Even this month, Facebook was fined $5billion. But it took years and cost multiple $millions to do.

We should worry also that the initial Libra documentation shows a big intention to control, maybe even to ‘own’ our ‘identities’.

The Tax / Government Issues

We can all dislike taxes, but:

– They are necessary to pay for welfare, social, health service, community, law enforcement etc. But also to watch over and regulate businesses.

– Taxation also comes from corporates including from Banks and other regulated businesses.

– The tax affairs of the Libra ‘gang’ are very nefarious and hidden in the most tax efficient jurisdictions.

– Regulation also requires companies to have capital, to safeguard money and look after ‘people’, to have an ombudsmen and compensation schemes…… and much more.

We all want faster, cheaper, more secure and convenient payments and banking: but we should also want our money (and that of our aging parents and our children etc.) looked after, not to lose everything overnight, not to have our data misused or lost (again). We need oversight, someone to challenge those who look after our money and we must have laws to protect us from Facebook (et. al.). They might (perhaps) be able to deliver ‘faster’, ‘cheaper’, ‘convenient’ to us; but we have to look at the complete picture.

Our leaders should make sure that whoever wants to start operating financial services and other regulated sectors should keep them within strongly regulated risk and operating frameworks.

We should also worry about:

a) A move towards single global payments and currencies. Would this be linked to say the USD / USA? (Where is Facebook? How do you complain? Will you get an answer?)

b) When governments lose their control over their fiat currencies (e.g. Italy and Greece) will they start to lose control of economies, finances and then political decisions. To Facebook?

c) Will bond markets, currency markets, labour movement, currencies, international payment networks, Interest rates, tax jurisdictions, insurance, pensions be next?

d) Governments need time to adopt/change complex issues properly and sometimes we/they need to understand the ramifications before we re-boot 400 year old industries.

e) Does currency union lead towards political union……?

For the first time in my life, I really want regulation, control, governance, transparency and oversight. This is a BIG issue.

Go for it Donald!

Bill Trueman is a leading payment, risk & fraud specialist who provide payment fraud prevention consultancy services to card issuers, banks, and business organizations worldwide. For more information one can visit his website at RiskSkill, apart from this he is also joint chief executive of AIRFA.

E-Money Risk, Fraud & Compliance Advisory Service by RiskSkill

About RiskSkill’s e-Money Compliance Services

Mobile Payment Fraud Prevention

RiskSkill help businesses avoid €multi-million fines and embarrassing brand damaging mistakes from regulatory non-compliance and process and regulatory mistakes. We help clear up the mess when we are called in later.

E-money Licence Changes:

Recent new financial services legislation in the UK, has led to the Financial Conduct Authority (FCA) introducing a Payments Systems Regulator from April 2014. The ECB, and the European Commission are also proposing ways to regulate and police the whole e-money arena, as are the international card schemes. The FCA is now also starting to review and audit the e-money licences they have granted previously and for observance with ALL regulations and also best-practices.

We believe that the FCA have seen that the governance of payment systems, including e-money issuers, is a difficult and continuous task and needs several layers of supervision and oversight in the way that other payment methods have already established (e.g. through the regulations of the international card schemes).

Requirements:

As an e-money licence holder, you need to ensure that your organisation and all of its agents, including passport holders, are fully conversant with and engaged in all due diligence in customer selection and identification, transaction/event screening, suspicion reporting, record-keeping, corporate assessment of exposures and risk, and the Base II (and III) capital assignment to the exposures. Having reporting to the FCA, a clear payment strategy and ABOVE ALL understanding and observance of laws relating to payments in all areas of operation are all also essential.

The main legislation that is pertinent is the meeting of the requirements of the Money Laundering regulations for all countries in which an e-money licence holder, and its agents and Passport Holders, operates. Not doing what is right by the European Money Laundering directives is the quickest way of losing money, being fined, suffering crippling bad media attention, or losing a market – or a full e-money licence (which will happen when firms are reviewed).

emv chip and pin online payment fraud

ACTIONS 

In advance of the FCA performing its own validation on individual license holders (and making high profile examples of those who are not fully compliant), you need to:

A. Make sure that all your processes, operations and compliance teams are all fully observant of all applicable regulatory requirements, laws and best practices.

B. More importantly though, are you confident that your third party agents are also fully compliant?

We Can and Will Help You In: 

1. Determining your current state of preparedness and identify areas for attention and action before the FCA requests an onsite review of your business.

2. Review the state of compliance and preparedness of your third party agents or passport-licences and report to you on them as the principal e-money licence holder?

We can provide you with our credentials when you need help, as we are a team of payment industry specialists, that have previously worked in many banks and card schemes, and now help organisations assess their current operational status, and become and remain compliant. We have also worked extensively with the rules, regulations, legislation and best practice across the sector, in the UK and across Europe and advise payment organisations on market strategy and direction rather than simply focusing on ‘tick-box’ auditing.

Contact RiskSkill for our Services for all Risks, Fraud and Compliance solutions for e-money, e-payment, internet payments, e-funds, e payment systems, online payment and digital cash’s safe transactions. RiskSkill is also a permanent member of AIRFA an independent and global risk and fraud advisors organization.

How to Protect from Being Victim of Mobile Payment & Internet Banking Fraud?

All About Safe ‘Mobile Payments’ and Internet Banking Transactions

What is Mobile Payments and what are the top 10 things that we should be doing to stop us from losing all our money?

Mobile Payment Fraud Prevention

Well as technology moves forward we’re now increasingly using our ‘mobile devices’ – we used to call them phones – to make payments. In its simplest form it is calling the bank to make a payment to someone; or using an iPhone/android app to contact our Bank to make a payment, or pay for something with a credit card. Looking forwards there’s the prospect that our mobiles will become the main payment device in shops and cinemas etc. We will probably just ‘tap and go’ for small transactions. There is naturally then a lot of evolution that has happened and this will continue as everyone from credit card companies to banks jump on the bandwagon. In response phone companies are rapidly integrating device and software technology to make payment by phone easier and easier.

The pace of technology protection for consumers is also developing, but not as fast as the growing number of solutions or providers that are involved. Things like encryption, virus protection and chips and PINS, secret codes and memorable passwords etc are all protections, but the weakest point in the chain is you and me as the users. We are only human, and have to be careful too. More of us will run the risk of having our identities stolen, and with them have all our money stolen and our lives invaded by the people behind these attacks.

How can we Protect Ourselves, and Make Sure that we do not Become the Victims of Mobile Payment and Internet Banking Frauds?

  1. Don’t think that it will not happen to me.Because it will. With more technology use, and easier access to our data, and through more routes, the identities of people in their teens and twenties is increasingly becoming more of a problem as they are the group most eager to embrace new technology.
  2. Stop people from getting to our technology.There are password locks on most devices now. Use them. And make sure that they are not easy to guess, no “PASSWORD”, “0000”, or “Mary” if you or your best friend or dogs are called “Mary”.
  3. Do not keep data on your devices that could be used by others.Invest in an app that password protects your data / details. They only cost a small amount, and make sure that the details are then stored encrypted. If you have to store details on the device without these things, put them behind a code that only you can understand.
  4. Keep key information in different places.A lot of fraud and losses occur because people are still ‘silly’ with their details. Keeping a PIN with the card number, with address details and/or personal details that will help a fraudster. Whilst the advice used to be ‘do not write your PIN on your card”; now it should be ‘do not keep the log on details and password with the web access address!
  5. Beware of Phishing emails.Many fraudsters, half way across the world get your details from you WITH YOUR HELP. They make an email look like it is from your bank, a delivery company or someone else you are expecting emails from – like Paypal, the tax office, Facebook or Ebay; and then present you with a screen to sign on with your password. Then they have your private details. Be extra cautious of such incoming emails.
  6. Beware of sharp talking callers.Many frauds still start with crooks who call/text/email you or me and explain that there has been a problem on your account that has been blocked, and to disclose your card details/PINs addresses or other information, in order to unblock the account. Remember, if they want to ID you, who contacted who? Identify them first.
  7. Do not make payments in a hurry or when you do not want to.This is when we make mistakes and expose ourselves.
  8. Only use machines that you know.Internet Cafes can be infiltrated, have software added, hardware added or any combinations. DO NOT MAKE PAYMENTS from other people’s machines unless you really know what you are doing and you have a safe, end-to-end secure conversation going on; that you know that you are not being overseen, that there is no hardware/software running etc. And do not enter / remember passwords on any machines, especially not strange machines.
  9. Avoid using the same passwords.Obvious that one isn’t it, but so many people do!
  10. Look after all personal details.Be protective with personal details. Do not use your PINs, card numbers, card expiry dates, addresses, phone numbers or mother’s maiden names etc. in public, in earshot of others. Type PINs and passwords covered up, and always assume that someone is watching or that there is a micro-camera installed by crooks anywhere that you are putting, reading or typing personal details.

Remember, that as the technology and connectivity leaps forward it is the fundamentals and people issues that become the biggest weaknesses, and we all have to work to ‘mind the gap’ that this leaves open; until we have remote/mobile real-time DNA testing – which is a long, long way off.

Bill Trueman is a leading payment, risk & fraud expert who provide payment fraud prevention consultancy services to card issuers, banks, and business organizations worldwide. For more information one can visit website at RiskSkill, apart from this Bill is also a permanent member of AIRFA.

How do we Need to Attack the Fraud Losses as They Arise and Rise?

corporate fraud prevention

Increasing fraud losses are one of the main concerns of most of the organizations worldwide. But if we take care of some points then we can minimize such fraud losses. I am mentioning some important points to minimize such fraud losses in any organization.

  1. Ensure that management are fully behind the need to address the problems and prepared to invest in the solutions even if they will take more than a few months to see pay-back. Often the payback for these things is a matter of weeks, because left without a solution the fraud rises exponentially. We often need to invest to prevent this….. again.
  1. Make sure that the problem is being measured; and any which way. There is no point in investing in a ramped up a POS identity validation or rule-sets in a solution if the problem is in the e-commerce field, and equally little point in spending money on a overseas issue or a portfolio review if we do not identify our new customers properly. So we need to measure the problem to focus our attentions on the solutions needed, but also to ensure that the right management can see the trends and start demanding the right investment in the right direction.
  1. Often we see such problems where there is investment and there is measurement and management, but no-one on the board is responsible i.e. has ‘ownership’ of the rising losses that start to kill the profitability. Someone has to be responsible and someone’s head has to be about to roll if they do not get addressed. And if someone does own the problem, usually they take action and make sure that the right things happen. Hopefully.
  1. Lastly, if the culture is not there, things suffer and fraud goes up and up and up. People have to be hungry to find the liars and cheats and attack them. People have to demand immediate action and take the fight to the crooks and cheats, and we have to be hungry to address the IT challenges, rule corrections, falling staff levels, loss of focus in the management team. We also have to work as teams and both be able to deal with the problems as we find then, to LOOK for the problems that seem to underpin the problems but also to have the function in the business to PREVENT the next possible attacks.

Bill Trueman is a leading payment, risk & fraud expert who provide payment fraud prevention consultancy services to card issuers, banks, and business organizations worldwide. For more information one can visit website at RiskSkill, apart from this Bill is also a permanent member of AIRFA.

European Union Initiates Reduced Inter-Regional Card Processing Fees

Kevin Smith, Riskskill: What does the inter-regional interchange fee rate picture look like today and where is it moving to?

 

Cards Inter-Regional Interchange Fees

The European Commission is the first competition authority to take action against Visa and Mastercard for their excessive inter-regional interchange fees. With its experience and successes in reducing intra-regional interchange fees in Europe, this latest action and its positive impacts has set an interesting precedent. It is great news. The European Commission move addresses both regulator and merchant concerns about the unfair and extreme costs of processing non-European cards.

Since 2015, domestic and intra-regional consumer card interchange rates within Europe have been driven down significantly. Although the end result of these fee reductions should have been passed through from merchants to customers, it is not clear how or if this has occurred. Recent Payment Systems Regulator (PSR) attention and their UK industry consultation has shown that the merchant service charge (MSC) also contains many other scheme fees, acquirer fees and margins.

And let’s not forget the myriad of other organisations in the transaction processing flow, providing their services and expecting their fees.

European regulatory attention and merchant concerns should not be a surprise. Not when typical consumer card interchange rates within Europe are now at just 0.20% (debit) and 0.30% (credit) – where they are 1.20% and up to 1.97% for equivalent inter-regional POS transactions in Europe.

Most merchants in Europe, have more domestic card payments than other European card payments; and only lastly non-EU card payments. On this basis, most European merchants, do not experience or notice the impact of accepting cards issued outside of Europe.

However, for many European merchants with lots of international customers, their cost of accepting cards is exaggerated by these disproportionately higher inter-regional interchange fees.

The wide gap between domestic and intra-Europe interchange costs and those for inter-regional transactions makes us ask what the different costs are for processing these transactions, i.e. are there really any greater risks or costs involved with the inter-regional transactions?

Based on the rhetoric use by the European Commission, Visa and Mastercard strangely, did not fight for the status quo, so quickly led to the agreement of new and reduced fees.

So what does the inter-regional interchange fee rate picture look like today and where is it moving to?

Figure 1: Card Present Transactions acquired in Europe

Face-to-Face / Card Present Transactions Inter-regional Interchange Fee – Today Inter-regional Interchange Fee – Pending
Visa Consumer Debit Between 1.10% and 1.97% 0.20%
Visa Consumer Credit 0.30%
Mastercard Consumer Debit Between 1.10% and 1.98% 0.20%
Mastercard Consumer Credit 0.30%

Figure 2: Card Not Present Transactions acquired in Europe

Online / Card Not Present Transactions Inter-regional Interchange Fee – Today Inter-regional Interchange Fee – Pending
Visa Consumer Debit Between 1.44% and 1.97% 1.15%
Visa Consumer Credit 1.50%
Mastercard Consumer Debit Between 1.44% and 1.98% 1.15%
Mastercard Consumer Credit 1.50%

The European Commission argued that this reduction: “will lead to lower prices for European retailers to do business, ultimately to the benefit of all consumers”.

For those merchants with higher card acceptance from outside of Europe, the European Commission believe that the cost savings could be 40%.

The European Commission decision does not raise important further questions about other payment scenarios:

a) Now that the parties have agreed lower inter-regional interchange rates, when will these revised fees come into force?

The European Commission states: “Under the commitments, Mastercard and Visa each undertake to reduce the current level of inter-regional interchange fees to or below the following binding caps, within six months:”

NB: the scheme commitments will apply for five years and six months from the above date.

But when does this six-month period begin?

  1. The date from the which the European Commission made the scheme commitments legally binding under EU antitrust rules, or
  2. Is it from the date communicated by each scheme to its respective client issuers and acquirers?
  3. Or as reported by the BBC UK website on 29th April 2019, i.e. on 19th October 2019 for five years.

Scheme updates posted following the European Commission press release confirm that the effective date for the inter-regional interchange alterations is indeed 19th October 2019.

b) What about inter-regional debit and credit cards in mail order and telephone order (MO/TO) in Europe?

The European Commission only refer to online payments. Can we assume that MO/TO transactions, though not specifically mentioned, are included in the European Commission definition of Card Not Present transactions?

Scheme updates posted following the European Commission press release confirm that Card Not Present transactions are all transactions other than card present transactions, so MO/TO transactions are included in the planned fee reduction.

c) A trustee will be appointed by the Commission to monitor the implementation of the commitments. Who will be monitored?

  1. Will they monitor Visa and Mastercard and whether they enforce the fee reductions in line with the agreement?
  2. Or will they monitor individual merchant acquirers and their agents to see if they deploy lower pricing within the agreed timeframe?
  3. Or will they monitor individual merchants to see if the lower costs lead to lower consumer prices?

d) How will EU card issuers justify and defend their continued receipt of higher interchange rates for card usage outside of Europe – i.e. the reverse of this agreement?

Will similar regulatory and merchant pressure outside of Europe lead to reduced interchange fee costs elsewhere and therefor reduced income for European issuers for non-EU based transactions?

As with previous interchange fee rate reductions, we should expect unexpected and unintended consequences?

e) If a South African-issued card accepted in Europe incurs the new lower interchange rate, what does that mean for the same card accepted in Australia or the US?

This is not a matter for the European Commission, but clearly, they will provide essential guidance and advice to other national payments and competition regulators around the globe to challenge Mastercard and Visa further.

International merchants with a presence in Europe and in other regions and countries around the world will increasingly question why they are incurring very different interchange fees across different regions and markets.

Is this the ‘beginning of the end’ for over-inflated and higher global inter-regional and local interchange rates?

f) What about the three-party model?

Inevitably, such schemes will be forced to revisit their merchant pricing to ensure any merchant preference or favour for such brands.

g) Will lower interchange fees, mean increases in other card processing fees?

In the UK most noticeably, and across the rest of Europe, we have witnessed that lower interchange rates have been offset by increases in acquirer pricing, such that the positive pricing effect does not pass through to the end customers.

Are we going to see a similar offset of inter-regional interchange fees with poorly explained increases in scheme fees for inter-regional transactions and corresponding acquirer processing fees?

h) What about non-EEA countries? The European Commission press release on 29th April 2019 states that the inter-regional interchange rate reduction will positively impact transactions acquired in EEA countries.

Effective April 2019, Visa no longer treats Israel, Switzerland and Turkey as part of their EEA market definition. This means that transactions into and out of these countries, for example the UK or US, are now treated as international for interchange purposes and scheme fee levels.

i) So what does this mean for commercial cards and any other programmes? These have been excluded from regulatory pressure on interchange reimbursement fee reductions.

Inter-regional commercial card transactions do remain a very small percentage of total card expenditure for many European merchants.

Commercial card interchange rates are typically between 0.20% and 2.10%.

Small Business, Commercial and Corporate Card Transactions Inter-regional Interchange Fee – Today
Visa Commercial Debit Between 0.20%+ GBP 0.01 (according to Visa Business Immediate Debit) and 2.00%
Visa Commercial Credit
Mastercard Commercial Debit Between 0.20% (according to Mastercard debit Government payments) and 2.10%
Mastercard Commercial Credit

So how long will it be before commercial debit and credit cards are included in the regulatory challenges to reduce interchange fees?

The changes and this agreement are all great news and positive developments, but the implications and implementation still need to be better understood and defined, and there remain many questions and some big issues there-in.

About Kevin Smith

With over 25 years in the payments business, Kevin is a trusted and experienced practitioner and thought leader in payments, technology, issuance, acceptance and acquiring. At Visa, Kevin headed acceptance and acquiring development and was instrumental for changing how Visa viewed payment acceptance, acquiring and retailers in Europe. Kevin also led fraud and compliance management functions at a senior level at Visa. Kevin has worked in retail management for a major UK retailer, and for a major UK high street bank in its retail banking cards and acquiring development business; in senior roles at Switch, the original UK domestic debit card scheme; as well as in Visa Europe and Visa International in the US.

About Riskskill

Riskskill is a leading Europe-based payments and risk management consultancy, with an impressive international track record of helping payments businesses to find and mitigate payments challenges and risks. The firm works with clients to put in place strategies and programmes of work to make payments businesses or functions more profitable, less susceptible to losses, risks and regulatory issues and compliance problems. Riskskill.com is a global GARS Reviewer for Visa and a member of AIRFA, the Association of Independent Fraud and Risk Advisors

For further information, please contact: Bill Trueman or Kevin Smith at www.riskskill.com and enquiries@riskskill.com

Card payments – Who am I dealing with? The parties involved are changing… again

Bill Trueman from Riskskill.com talks about who is involved in the four-party payment models and how and why these are changing

In four party models (those that involve Mastercard and Visa), include:

  • Cardholders – like us.
  • Merchants – the shops that we use, whether in the high-street or on-line.
  • Card Issuers: usually banks that provide us with the plastic-card, the CHIP, PIN and then our statements and customer services.
  • Merchant Acquirers: which provide the equipment to accept payments, but which also settle against the issuers globally through the card schemes and most importantly take the risks involved in doing so.

How these parties operate with one another is shown in figure 1 below. Contracts exist between each party, whether formal, OR

a) the sale of goods and services contract (in shop),
b) Visa and Mastercard rules and contracts – through which issuers and acquirers connect globally.

Base four-party model for Card Payments.png
Base four-party model for Card Payments

This is how the processes have worked in the past, but things are changing and getting increasingly complicated.

Newer Parties

Businesses have evolved because of a need for evolution, and/or because of an evolving internet, mobile technology, increasing demands of ‘new solutions’ from merchants and the need to serve ever-newer cardholder services. Acquirers of yesteryear (banks) did not or could not change with market demands. The types of organisations that have evolved include:

Sales/Introducer organisations

Organisations that ‘sell to’ merchants on behalf of acquirers. Often these ‘take a cut’ of all transactions, and often contractually taking some of the work and the risks.

Technical Gateways

Companies that provide merchants with specialist connectivity / IT solutions in the process; aim to link the merchants to the acquirer akin to an internal IT department for payments. These may include specialist data security and tokenization solutions.

Intermediate Processors – PSPs/ Payment Facilitators

Companies that work with the merchants to process transactions to acquirers, and/or other parties for ‘other’ payment types; adding services that acquirers did not or could not provide. These may be specialisms for particular markets or for particular software or applications. Elements of technical gateways and/or specialist data security and tokenization solutions may be involved.

Acquirer Processors

Companies who will provide the processing services for multiple acquirers, or increasingly, also act as acquirers too; and/or offer ‘white-label’ acquiring solutions/platforms and services.

These are shown in figure 2 – Complications include:

– Many different ‘names’ for parties involved across geographies, by the organisations themselves, through the categorisation of these by the card schemes/ regulators. These names change as the market changes.

– Many of these parties overlap into one another e.g.

  • A sales/introducer may also start to provide equipment or software, a gateway solution, and/or become an intermediate processor themselves.
  • Intermediate processors, may apply for their own acquiring licences to become banks and/or Visa / Mastercard licensed businesses; or set-up or acquire sales businesses.
  • Acquirers may buy or establish intermediate processors, or other parties in the chain and;
  • Technical transaction processors (Gateways) may become sales businesses or provide intermediate processing and/or other services to the merchants.

– Three-party card schemes such as American Express and Diners can also be processed through the different parties involved above, in parallel or separately.

– AliPay and WeChat Pay are making big inroads in Europe, and are now by many reports bigger than Mastercard and Visa and have big ambitions.

– Domestic card schemes operate in many markets across the EU.

– Other payments schemes – electronic money, wallets, digital currencies.

Acquirer intermediates and disintermediation.png
Acquirer intermediates and disintermediation

Challenges

The challenges that arise and cause difficulties include:

a) Bank regulators required Banks to understand, monitor and continually manage all risks involved. The ‘art’ of doing so is being lost as other parties move into acquiring without the same regulation and knowledge.

b) Risks are often not identified, with credit risk largely uncalculated, untracked or ‘priced for’.

c) Customer identification can become diluted when multiple parties are involved; especially when contracts are written without it being clear who is responsible for the risks/exposures; so problems evolve.

d) Regulators and card schemes introduce many and varying rules and requirements that are often hard to understand and to communicate.

e) Capital adequacy / liquidity – banks are always required to manage this; but as non-bank acquirers develop, there is no non-bank regulator to force these business protection solutions with active regulators examining progress.

f) The fallacy that “acquiring is simple”, has led to more ‘new breed’ acquirers emerging with many quickly failing or required to stop trading when things ‘go wrong’.

Common Challenges that must be mitigated

1. Understand a) exposures, b) risk of failure, c) reward for exposures/risks; as well as all the ‘tricks’ used to con acquirers.

2. Have a clear strategy, policy, procedures, documented risk appetite, calculation methodology, management information and reporting structure.

3. Ensure that all card scheme, regulator, AML and other laws and rules are understood, stayed abreast of and corrected when they arise

4. Measure and manage all changes in business models, exposures, risks, management etc.

5. Look for daily / real-time unusual business features and ‘blips’ in the transactions away from norms and then act upon them.

6. Manage and monitor all third-parties employed or delegated-to in the process of card acquiring.

About Riskskill

Riskskill is a leading Europe-based payments and risk management consultancy, with an impressive international track record of helping payments businesses to find and mitigate payments challenges and risks. The firm works with clients to put in place strategies and programmes of work to make payments businesses or functions more profitable, less susceptible to losses, risks and regulatory issues and compliance problems. Riskskill.com is a global GARS Reviewer for Visa.

For further information, please contact: Bill Trueman or Kevin Smith at enquiries@riskskill.com

About Bill Trueman

Bill Trueman is a professional banker and a payments and risk specialist, with over 25 years of experience. He headed-up risk functions and special investigations in Lloyds Bank issuing and acquiring; acquiring and processing at First Data, and then for insurance risks at RBS / Direct Line. For the last 12 years he has been diving-into many other businesses: largely advising merchants, acquirers and others in the payment chain; to reduce risks and costs, and to find improved ways to do business and/or to make significant organisational change. He is a mentor for innovative payments startups and sits on working parties and panels for the UK regulators.

Source: https://www.thepaypers.com/expert-opinion/card-payments-who-am-i-dealing-with-the-parties-involved-are-changing-again-/776837