Addressing the Silent Crisis of Failed Payments – Fintech Singapore

by Rebecca Oi December 11, 2023 In a global financial landscape where efficiency and accuracy are paramount, the challenge of failed payments is a significant hurdle for small and medium-sized enterprises (SMEs) and financial institutions (FIs), particularly in a vibrant market like Singapore. This issue transcends mere financial loss, encompassing operational disruptions, customer dissatisfaction, and potential damage to reputation. Tackling this challenge requires a multifaceted approach focusing on data accuracy, technology integration, fraud prevention, and balancing customer experience with regulatory compliance.

Understanding the complexity of payments At first glance, payment processes may seem straightforward but can be deceptively intricate. Whether you are a small business owner or a multinational financial institution, the central challenge remains consistent—ensuring that payment instructions are accurate and complete. Surprisingly, one of the most common reasons behind payment failures is incomplete or inaccurate data.

To address this issue effectively, having a reliable source of truth for payment data is indispensable. This central repository provides essential guidance on the requisite data elements for payment instructions and aids in validating customer-provided information. Edward Metzger, LexisNexis Risk Solutions Vice President of Market Planning for Payments Efficiency Edward Metzger, LexisNexis Risk Solutions Vice President of Market Planning for Payments Efficiency, highlighted the core issue: “The main problem with payments is that they can be very complicated, yet they are absolutely essential.

Whether you’re a small company or a large bank, the challenge remains: ensuring that every payment instruction contains the correct data in the right format. ” For FIs, the consequences are equally daunting, as they face expenses associated with the correspondent banking network. Therefore, the primary solution to reduce the cost of payment failures lies in harnessing the power of data and technology to ensure payments are successful upon the first attempt.

The single source of truth To address this challenge, a solution emerges—creating a single source of truth for payment data. The essence of this solution is to define what data is necessary to complete a payment instruction accurately and then validate that data. By establishing this single source of truth, businesses, and FIs can ensure that the information provided by customers is correct from the outset.

This proactive approach eliminates the costly consequences of failed payments. Edward emphasised the importance of getting payment data right the first time. “Solving the problem before it even occurs is the key.

Sending a payment and then dealing with the fallout of a failed transaction is costly and frustrating for both SMEs and banks. ” Minimising the impact of failed payments It is no secret that nearly two-thirds of businesses consider failed payments to be a significant operational burden. To alleviate this burden, the focus must shift towards leveraging data and technology to make payments work correctly the first time and identify potential issues before they escalate.

This approach is not limited to domestic payments but is especially relevant to international transactions, which often involve a complex web of correspondent banks. The challenge in international payments primarily revolves around ensuring data accuracy at every step of the payment chain. Edward spoke of the pivotal role of data and technology in creating and validating payment messages.

By addressing data accuracy upfront, businesses can prevent costly failures and minimise operational disruptions. Enhancing payment reliability The LexisNexis Risk Solutions True Impact of Payments Report reveals that over 70 percent of businesses express dissatisfaction with their current payment failure rates. To enhance the reliability of payment processing systems, organisations should focus on acquiring accurate data and regularly refreshing it.

In a world where thousands of banks undergo constant changes, proactive data collection is indispensable. Furthermore, delivering data in the format that customers require is equally crucial. Some customers prefer data in their core systems, while others need it integrated into their digital front-end interfaces.

This flexibility ensures that data can be effectively used to improve payment reliability. “We play a role in assisting businesses in their pursuit of reliable payment processes. Our proactive data collection and delivery approach empowers organisations to reduce the risk of payment failures, ultimately leading to improved customer experiences,” said Edward.

Balancing trust and customer experience In the face of increasing sanctions and regulatory pressures, FIs must navigate the complexities of geopolitics and sanctions lists while delivering a smooth customer experience. Edward suggested merging sanctions data with payment validation data to inform customers in real-time about sanctioned entities. This proactive approach saves customers from failed payments and reduces operational costs for FIs.

Additionally, it prevents tainted payments from entering the correspondent banking network, thus bolstering security. “ We have a solution to this issue: the LexisNexis Bankers Almanac Validate which verifies global payment data and prevents fraud. It issues early alerts about sanctioned banks, helping organisations avoid compliance risks and costly payment issues.

This solution enhances the customer experience, fosters trust, and integrates easily into various platforms for real-time data verification,” said Edward. Combatting fraud As the world becomes more interconnected and instant payments gain prominence, the threat of fraud also rises. Push payment fraud, where funds are transferred to fraudulent accounts, is a significant concern.

Balancing the need for robust fraud prevention measures with seamless customer experiences is a crucial challenge. The goal is to provide customers with indicators or assurances about the legitimacy of their payments. Businesses need to ensure that they are sending money to the intended recipient.

Financial institutions and companies can verify payment recipients’ identities more effectively by utilising data and technology. This approach reduces the risk of fraudulent payments and ensures a better customer experience. Implementing multiple layers of fraud prevention measures is crucial to create a robust defence against fraudsters.

LexisNexis Risk Solutions offers advanced fraud prevention solutions that enable financial institutions and businesses to safeguard their payment processes while maintaining a seamless customer experience. The role of up-to-date payment data in real-time payments Amid the financial industry’s shift towards real-time payments, the significance of up-to-date payment data cannot be overstated. The immediacy of instant payments demands precision and validation.

Whether talking about traditional banks or their digital counterparts, this imperative applies across the board. The overarching goal remains consistent – delivering real-time payments that are swift and impeccably accurate. Ramanathan Sivabalan, LexisNexis Risk Solutions Director of Market Planning for Financial Crime Compliance and Payments for APAC Within the Asia-Pacific (APAC) region context, Ramanathan Sivabalan, LexisNexis Risk Solutions Director of Market Planning for Financial Crime Compliance and Payments for APAC, underscored the paramount importance of financial transparency and inclusion.

In APAC, financial inclusion has emerged as a driving force behind digital innovation. Many nations within the region have recognised the transformative potential of extending financial services to underserved populations. Initiatives such as India’s Unified Payments Interface (UPI) and Singapore’s PayNow have played instrumental roles in democratising access to financial services.

However, this rapid digital transformation brings unique challenges, encompassing identity verification, fraud prevention, and the assurance of secure digital payments. Ramanathan observed the remarkable shift in payment preferences, noting that “Asia has witnessed a tremendous move away from cash, even among the middle-aged population. Digital payments are fast becoming the norm, positioning the region as a global payment leader.

” Against this backdrop, he placed a strong emphasis on financial inclusion and transparency, particularly in the context of Asia’s developing markets. The absence of proper documentation and financial education presents significant hurdles. Ramanathan stated, “With the rise of real-time payments, the ability to get payment validations right in milliseconds has become indispensable.

This necessitates using technology and data solutions to identify and address payment issues promptly. ” “LexisNexis Risk Solutions is steadfast in its commitment to tackling these challenges head-on by offering comprehensive solutions encompassing electronic Know Your Customer (KYC) processes, robust risk profiling, and the assurance of accurate and dependable payments,” he said. This approach not only serves to advance financial inclusion but also acts as a robust deterrent against the risks associated with money laundering.

The evolving payment landscape Edward underscored that the payment landscape continually evolves, with innovations such as central bank digital currencies (CBDCs) gaining prominence. The impact of CBDCs on payments, financial inclusion, and monetary policy remains an ongoing discussion. The key takeaway is that regardless of the form of currency used—whether it’s a traditional fiat currency, a CBDC, or even a cryptocurrency—the fundamental principles of trust, transparency, and interoperability are essential for creating a robust payment infrastructure.

In the ever-evolving landscape of payments, data and technology are the keys to reducing failed payment costs while delivering excellent customer experiences. Building and maintaining trust is at the core of all these strategies. This can be achieved by implementing solutions that ensure payment accuracy, prevent fraud, and enhance the overall customer experience.

SMEs and FIs must prioritise accurate payment data, proactive sanctions monitoring, fraud prevention, and seamless real-time payments. As the Asia-Pacific region continues to drive innovation and financial inclusion, partnerships between governments, financial institutions, and solution providers like LexisNexis Risk Solutions are essential. Trust, transparency, and interoperability will shape the future of payments, ensuring that financial systems serve the needs of all.

It is a journey toward a more efficient, secure, and inclusive financial ecosystem that benefits society. To explore these solutions further and adapt them to your specific needs, contact LexisNexis Risk Solutions . Get the hottest Fintech Singapore News once a month in your Inbox SEO Powered Content & PR Distribution.

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Source: https://fintechnews. sg/80624/sponsoredpost/addressing-the-silent-crisis-of-failed-payments/.