How Is Payment Processing Regulated?
When it comes to payment processing, treasurers and finance managers profit from speedy, secure payment processing solutions due to innovative business procedures. As payment systems have changed with the legislation that regulates them, the waves of regulations in financial markets have imposed stricter procedures. The fintech revolution, globalization and business process digitization have all aided banks and financial institutions in addressing delays in business payment systems. Simultaneously, rules such as the Second Payment Services Directive (PSD2) have created frameworks to adapt all companies.
With speedier payments, Swift GPI, and credit card corporations like Visa providing comprehensive business solutions, it’s widely assumed that the entire payment processing industry will have irreversibly changed within three to five years. And there’s a lot more driving the shift away from tried-and-true systems towards payments-on-behalf (POBO) and cloud-based systems.
- Liquidity and cash
Smart cards from Europay, Mastercard, and Visa (EMV), payment terminals with automated tellers, merchant accounts and payment gateways, e-wallets, etc., are currently driving the public payments agenda. As retailers embraced new card-based technology, many businesses sought to increase their online presence, resulting in a surge in merchant service providers. A payment gateway is embedded in the site, encrypting consumer data and sending it to the payment processor (or acquirer), which has a direct link to the credit card association, which then sends the transaction to the issuing bank for authorisation.
As technology progressed, so did cybercrime, prompting the introduction of the payment card industry data security standard (PCI DSS), which established a baseline of compliance for businesses that accept card payments and retain or process consumer data.
Larger organizations have profited from cross-border payment systems, automation between enterprise resource planning (ERP) and different payment portals have substituted manual transaction processing. Companies are becoming more interested in cloud-based solutions, believing banks are failing to satisfy customer expectations. They offer a variety of payment process tools, including cash management, fraud and error detection, speedier payments, SEPA and SWIFT, with the goal of emulating the retail market.
- Knowing the market
Know your customer (KYC) policies have helped businesses create better customer service processes. KYC is all about gathering information before onboarding new clients and having a thorough understanding of them in order to effectively assess risks. Various anti-money laundering directives have recently been effective, giving KYC processes more structure, avoiding tax evasion and unlawful commodity trafficking.
The repercussions of non-compliance begin with a thorough examination of internal processes and documentation, resulting in disruption and increased costs to everyday operations. If a breach is discovered, it can result in severe fines, the suspension of corporate operations, and even jail.
A significant impediment to payment processors is entering the market, with corporations unwilling to take the risk of sharing data with another organization suspecting whether they may or may not be involved in criminal activity.
A significant impediment to payment processors is entering the market, with corporations With the standardization of payment processing, regulations empower payment providers to seek sensitive customer information in order to perform POBO or collections on behalf of (COBO) services. Firms can engage with others directly with financial institutions and merge many bank accounts onto a single platform using API technology. With real-time cash position, dashboards, and bespoke reports, an open API enables for end-to-end visibility on multiple accounts.
The Payment Services Directive 2 (PSD2) prohibits businesses from imposing additional fees to customers who pay with credit/ debit cards in stores or online. It has given the payment processing ecosystem much-needed structure and clarity. PSD2 has pushed for standardization by introducing a single secure messaging system, subscription fees instead of single payment fees, mobile payments, and interconnected dashboards with various bank accounts.
The market is still in its infancy. Financial institutions continue to be concerned about security and fraud, as cyber thieves’ sophistication grows. Radar Payments pays close attention to keeping payment processing more transparent while also boosting security.
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