How can you comply with payment systems in the digital era?

Payment systems are the methods and technologies that enable the transfer of money between individuals, businesses, and institutions. In the digital era, payment systems are evolving rapidly, offering more convenience, speed, security, and innovation. However, they also pose new challenges and risks for compliance, such as data protection, fraud prevention, regulatory alignment, and customer trust. How can you comply with payment systems in the digital era? Here are some tips and best practices to help you navigate the complex and dynamic landscape of payment systems compliance.

1 Know your obligations

Depending on the type and scope of your payment activities, you may be subject to different laws and regulations that govern payment systems. For example, if you operate as a payment service provider (PSP), you may need to comply with the Payment Services Directive (PSD2) in the European Union, the Electronic Fund Transfer Act (EFTA) in the United States, or the Payment Systems and Netting Act (PSNA) in Australia. These laws and regulations may impose requirements on licensing, reporting, disclosure, consumer protection, anti-money laundering, and cybersecurity. You should consult with legal and compliance experts to understand your obligations and how to meet them.

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Achin Gupta, CAMS

Vice President, Transaction Monitoring, AML, Financial Crime, RCU
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Understanding of regulatory framework is the first step. An entity should be well-familiarized with its national and international laws and regulations. Regulations may vary from region to region but the objective is one i.e. generating trust in the system. Example: Recently online payment gateway PayPal was finned by FIU-India for noncompliance with reporting obligations under the PMLA Act. PayPal states that it only operates as an online payment gateway service provider and is not covered under the term Payment System Operator under PMLA for reporting obligations. Thus, the Court held “PayPal is liable to be viewed as a ‘payment system operator’ and consequently obliged to comply with reporting entity obligations as placed under the PMLA.

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Mohamed Abdallah

B2B Marketing Expert | Fintech Trends Enthusiast | E-Payments Expert | B2B Content Creator and Brand Builder | Brand Communication | Communications Strategist & Consultant.
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Use secure payment gateways that comply with industry standards and ensure secure transmission of payment information. Implement SSL/TLS encryption and other security protocols to protect data during online transactions.

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2 Implement robust security measures

Security is a key aspect of payment systems compliance, as you need to protect the data and funds of your customers, partners, and yourself from unauthorized access, theft, or misuse. You should implement robust security measures, such as encryption, authentication, authorization, firewalls, antivirus, and backup systems. You should also follow the industry standards and best practices, such as the Payment Card Industry Data Security Standard (PCI DSS), the Secure Socket Layer (SSL) protocol, and the ISO 27001 certification. You should also monitor and test your security systems regularly and update them as needed.

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Mohamed Abdallah

B2B Marketing Expert | Fintech Trends Enthusiast | E-Payments Expert | B2B Content Creator and Brand Builder | Brand Communication | Communications Strategist & Consultant.
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Deploy advanced fraud detection and prevention mechanisms, such as real-time transaction monitoring, machine learning algorithms, and behavior analysis, to identify and prevent fraudulent activities in the digital payment ecosystem.

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3 Educate and empower your customers

Customers are the core of your payment business, and you need to ensure that they are satisfied, informed, and protected. You should educate and empower your customers about their rights and responsibilities when using your payment services, such as fees, terms and conditions, privacy policies, dispute resolution, and fraud prevention. You should also provide them with clear and easy-to-use interfaces, tools, and channels to access and manage their payment accounts, transactions, and preferences. You should also solicit and respond to their feedback and complaints promptly and professionally.

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Mohamed Abdallah

B2B Marketing Expert | Fintech Trends Enthusiast | E-Payments Expert | B2B Content Creator and Brand Builder | Brand Communication | Communications Strategist & Consultant.
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Utilize strong authentication methods such as multi-factor authentication (MFA) and biometric verification to ensure secure access to payment systems and prevent unauthorized access.

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4 Stay updated and innovative

Payment systems are constantly changing and evolving, driven by technological innovation, customer demand, and market competition. You should stay updated and innovative to keep up with the trends and opportunities in the payment industry, such as mobile payments, biometric authentication, blockchain, and artificial intelligence. You should also be aware of the potential risks and challenges that these innovations may pose for compliance, such as interoperability, scalability, reliability, and regulation. You should adopt a proactive and flexible approach to adapt and optimize your payment systems in the digital era.

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Achin Gupta, CAMS

Vice President, Transaction Monitoring, AML, Financial Crime, RCU
(edited)
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with new innovations, the entity should Implement fraud detection and prevention systems to identify and mitigate fraudulent transactions promptly. Also continuously monitor the changes in regulations and industry standards. Regulatory requirements can evolve, so it's essential to stay informed and adapt your processes accordingly.

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5 Collaborate and cooperate

Payment systems are not isolated or independent entities, but rather interconnected and interdependent networks that involve multiple stakeholders, such as customers, merchants, banks, regulators, and other PSPs. You should collaborate and cooperate with these stakeholders to ensure a smooth and compliant payment process, as well as to leverage their resources, expertise, and insights. You should also join and participate in industry associations, forums, and initiatives that promote and support payment systems compliance, such as the European Payments Council (EPC), the Electronic Transactions Association (ETA), and the Payment Systems Regulator (PSR).

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Achin Gupta, CAMS

Vice President, Transaction Monitoring, AML, Financial Crime, RCU
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I agree that a payment system is an interdependent network that involves multiple stakeholders but one should do its vendor due diligence. If you use third-party vendors for payment processing or related services, ensure that they also comply with relevant regulations and security standards. Perform regular due diligence on your vendors.

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6 Review and improve

Payment systems compliance is not a one-time or static activity, but rather an ongoing and dynamic process that requires constant review and improvement. You should regularly evaluate and audit your payment systems, policies, and procedures to ensure that they are effective, efficient, and compliant. You should also identify and address any gaps, weaknesses, or issues that may arise or emerge in your payment operations, systems, or environment. You should also seek and implement feedback, suggestions, and recommendations from your stakeholders, experts, and peers to enhance and optimize your payment systems compliance in the digital era.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Achin Gupta, CAMS

Vice President, Transaction Monitoring, AML, Financial Crime, RCU
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With the advancement of technology, we should not ignore the KING i.e. customer. we should also draft strong KYC and AML procedures to verify the identity of customers and monitor transactions for suspicious activities. Reporting of suspicious transactions to the appropriate authorities as required by law.

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How can you comply with payment systems in the digital era?

1

2

3

4

5

6

7

1 Know your obligations

2 Implement robust security measures

3 Educate and empower your customers

4 Stay updated and innovative

5 Collaborate and cooperate

6 Review and improve

7 Here’s what else to consider

Payment Systems

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How can you comply with payment systems in the digital era?

1

2

3

4

5

6

7

1 Know your obligations

2 Implement robust security measures

3 Educate and empower your customers

4 Stay updated and innovative

5 Collaborate and cooperate

6 Review and improve

7 Here’s what else to consider

Payment Systems

Rate this article

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