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Customer Experience and Design

Money20/20: 3 Key Themes to Harnessing Payments Innovation and Regulations

The Perficient team is back in Vegas for another year at Money20/20! Before I jump into discussing a couple of the key themes from the first day of sessions, let me just say that the Money20/20 picked up right where they left off with last year’s show and has added some nice new touches of “flair”. As usual, conference attendees are immersed in branding from all of the top sponsors and the Money20/20 logo is EVERYWHERE you look. In addition to the nice big screens with video footage of the panel discussion, they’re now showing a live broadcast of several of the panel sessions on big screen TVs outside the rooms for people to watch. Several of the track sessions have been full or standing room only so this is a great way for others to still get to see and hear what all the buzz is about. Everyone seemed to be pretty excited about the Hackathon too. Now onto the good stuff…Money2020

There were several key themes and buzzwords we heard repeatedly throughout Sunday’s sessions:

1. Governance & Education – Virtual, digital and cryptocurrency…whatever you want to call it, the topic of how consumers viewed it, how financial institutions were handling it, and innovative products built on it was predominant during many of the sessions so far at Money20/20. So why was this brought up so much the first day? There are so many unknowns around it being a regulated and secure form of payment yet we’re seeing tons of new innovative products and payment systems that accept it or are built on it. The consensus was that there needed to be more standards around electronic money and cryptocurrencies like Bitcoin before it will ever reach critical mass. Simply put, TD Bank’s Hisham Salama said, “card-based payments will prevail until new regulations exist around digital currencies to protect consumers.” This form of payment is not backed by the government or insured by the FDIC. Eric Goldberg, Senior Council for the CFPB, was a panelist on the session, “Accelerated Innovation: Balancing Innovation and Regulation” and echoed this concern. The CFPB was attending Money20/20 to learn from what others are saying and doing in payments so they can better advise the industry on regulations intended to protect consumers.

In fact, the CFPB recently issued a statement warning consumers about the concerns and potential issues with virtual currency. Here’s a quote from the statement:

In a nutshell, while virtual currencies offer the potential for innovation, a lot of big issues have yet to be resolved – some of which are critical. If you are interested in using or buying virtual currencies, you should be aware of the associated risks.

At one point during the session with the CFPB, an attendee asked the question why wasn’t there just one governing body to help standardize and advise financial services, payment companies and consumers on how to deal with electronic money and new forms of payment like cryptocurrency. I think all the panelists looked at each other and there were several seconds of silence before one of them jumped in to try to tackle the question. The answer is – there isn’t. And the better question in response may be – will there ever be? In a perfect world, I”m sure everyone would love for this to be the case. It would make everyone’s jobs easier and the future of payments innovation much more predictable. However, that’s not the case in the current environment so as companies look to better balance innovation and regulation – they’re focusing on several key areas: security and privacy, the user experience, understanding the customer value chain and leveraging tools and technologies (like Apple Pay) to extend payments not disintermediate them for consumers.IMG_3818

2. Collaboration is Key – During the panel, “Managing AML and OFAC Risk in a Dynamic Regulatory Environment” led by PwC’s Daniel Tannebaum, it was apparent that the word collaboration would be the predominant theme during this session. Joined by FinCEN’s Jamal El-Hindi, panelists from PayPal and AMEX offered some great advice for Money20/20 attendees. First, Rick Small from AMEX talked about engaging with the business early and often when it came to developing and launching new financial services and payment products. Tone, implementing a risk-based approach and clearly understood the organization’s risk appetite are three critical aspects of managing AML and OFAC compliance.

In talking with the Perficient team after this session, one of my teammates commented that compliance isn’t compensated like the business is, and as a result is often a challenge integrating this aspect to make ends meet and help the business grow. However, AMEX’s Small commented on how compliance can add value and reduce risk for an organization. Making sure the proper controls and requirements are in place helps minimize cost inefficiencies up-front and can drastically reduce the risk of penalties, fines and reputational risk for an organization.

PayPal’s Gene Truono talked about businesses needing a cross-functional approach to compliance with collaboration from fraud, technology, product development and delivery channel teams. Without this having a “culture of compliance” will be nearly impossible. Panelists across the board also encouraged Money20/20 attendees to reach out to not only Federal regulators but state to help them better understand and interpret the dynamic regulatory environment and plan for the future. In reference to managing regulatory compliance, Truono jokingly said, “Can’t we get an app for that?” Among the thousands of personal finance management and payments apps added daily, I don’t think there is one available yet in the iTunes Store for regulatory compliance. Who wants to jump on developing that one?

3. Policies and Procedures – Right now security, privacy and fraud are probably the biggest concerns in the financial services industry today. The almost daily news of data breaches and reports of cybercrimes has made it a tough challenge to tackle for financial institutions and payment providers. From having the latest analytics tools to the proper controls in place, businesses are constantly having to find new ways to stay one step ahead of fraudsters. While there’s no “one size fits all” solution for global fraud and AML, panelist urged Money20/20 attendees to take a good hard look at several key areas within their business.

One, businesses need to have sound AML and KYC policies and reporting procedures in place to monitor and prevent fraud and money laundering. These areas continue to consistently be an ongoing area of investment for the larger financial institutions and has trickled down into smaller businesses and even into how firms are dealing with controlling cryptocurrency. If you happen to be a target or a subject of a federal investigation, you’d better hope you’ve crossed your t’s and dotted your i’s when it comes to the adequacy and effectiveness of SAR content and sanctions screenings.

Two, the industry as a whole needs to do a better job of knowing who their customers are and how personal financial data sharing can aid and streamline efforts. We’re starting to see financial institutions come together to back things like the Swift KYC Registry initiative. The industry needs to see more of these kinds of standards and utilities around compliance to help lessen the burden of dealing with the cost of compliance and using it as a competitive advantage. As several of the sessions mentioned, “smart” regulations can help foster payments and fintech innovation. They’re also designed to help keep a level playing field in the industry – most firms are just stuck in the unfortunate position of just trying to keep up. The shift towards a new operating model (one that harnesses regulations as opposed to just coping with them) in financial services is indeed a concern. As Money20/20 has proven, the pace at which payments and financial services innovation is occurring is rapid. Often times this means turning to the experts outside your doors – after all, that’s what we’re here for and there’s no shame in that.

We’re looking forward to Day 2 at Money20/20 and the shift in discussion around innovation and what’s ahead in payments. Don’t forget to stop by and see the Perficient team in booth #104 and continue the bank risk and regulatory compliance discussion with our experts!

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Elizabeth Dias

Elizabeth Dias is an experienced technology marketing strategist focused on the financial services and retail industry at Perficient. With over nine years of experience as a professional business-to-business (B2B) marketer, Elizabeth is knowledgeable in technology strategies for the financial services industry focusing on mobile banking and payments, data analytics, and enterprise information management. She also closely follows the fintech community as well as tech trends in social and digital, and is also an active blogger and thought leader on Twitter (@techmktggirl).

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