Regulations often get a bad rap. After all, no one likes being told what to do – and when it comes to the many payments regulations currently underway, that goes for banks and businesses too. But like other areas in our lives when we’re faced with ‘following the rules’, that resistance is often caused by a lack of understanding around why it’s necessary and how to comply.

The 2021 Business Payments Barometer, conducted by Bottomline and now in its 6th year, surveyed 800 hundred financial decision-makers across the UK to better understand a wide range of factors influencing the payments industry. One key focus of the survey centred around payments regulations and industry initiatives. The research report found that although several new regulations were developed in concert with new payment initiatives, this is the 3rd year respondents have reported a declining lack of preparedness for the looming compliance deadlines.

This is concerning when you consider that many of the drivers behind those regulations are beneficial to payments practitioners: fraud reduction, cash flow support, richer data, and improved cash management. All designed to support the fundamental challenges faced by businesses of any size.

Benefits of regulation

Let’s take a closer look at some of the more recent regulatory changes in ‘plain speak’ – the purpose and associated benefits of adopting these initiatives.

These first two stem from the UK Open Banking initiative which emerged in 2018:

  • Confirmation of Payee (CoP) – this new verification service for payments defends against authorized push payment fraud (APP). APP is a type of fraud known as ‘bank transfer fraud’ and occurs when money is unknowingly transferred to a scammer’s bank account. The transfer is usually requested by a fraudster impersonating a trusted individual or company and the funds can be hard to recover due to its seemingly authorised status. Automated CoP validation makes sure that the payee’s name matches the recipient’s bank account before releasing the payment — without having to alert either party, making it a seamless process.
  • Request to Pay (RtP) – this messaging platform allows for flexibility in how bills are paid. After receiving a secure request payment message, the payer can decide from several payment options. This platform delivers lower transaction costs and helps companies better manage cash position. Additionally, the payment platform takes advantage of the speed that real-time payments offer. 

This next is a truly global initiative that is set to support innovations in digital payments;

  • ISO 20022 – a new standardised messaging platform, designed as a global, common language for financial messages. The richer data of this universal messaging presents a springboard to address many challenges.  It embraces interoperability, simplifies the routing and processing of domestic and cross-border transactions, delivers better security and greater efficiencies.

With so many clear benefits to these regulations, it might be difficult to understand why more companies aren’t proactively preparing to meet compliance deadlines. As previously noted, a lack of clarity or conflicting messages might be to blame for most of the confusion. One solution would be for regulators and industry stakeholders (payment providers, banks, and consultants) to focus on informing and educating their business partners about specific initiatives and clearly communicating their use-case benefits. Additionally, providing more details around adoption and implementation could go a long way to arming businesses with what they need to act.

For more insights into the results from Bottomline’s 2021 Business Payments Barometer, including expanded commentary on current and future regulations, download the full report here. Also included are sections exploring fraud and financial crime and what’s driving the advancement of payments technology.

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Posted by Paul Fannon

As Managing Director, Global Business Solutions, Paul leads customers, partners and teams to stay ahead, stay protected and find more value across the global landscape of banking, payments and financial crime as it evolves. Whether that’s helping customers activate the shift from software to cloud, interpret changing international regulations, simplify cross-border complexity or win the fight on fraud, Paul champions the charge for customers across international markets. He is a strong advocate for the development and growth of team members in delivering customer delight on the journey. Paul has over 25 years of experience in payments, financial technology and international go-to-market strategy.