Around the globe, the payments ecosystem is rapidly becoming more diverse – and more fragmented – as a once-in-a-generation transformation in how payments are made takes place. Financial crime risk management needs to adapt to the new ways in which transactions are being processed, and the fresh human behaviours these new payments ecosystems are creating.   

For example, in 2021 there were more than 40.4 billion payment transactions in the UK[i], including card transactions, which are rapidly replacing the use of cash. By 2031, cash is anticipated to be used to make just 6% of all payments, compared with 15% today. With increased digitisation, open banking initiatives and the falling cost of enabling technologies, new payment networks are springing up – including peer-to-peer and crypto-based payment networks. Examples include: 

• Circle Pay – Launched by crypto firm Circle, it enables individuals to send money to 29 different countries in a variety of currencies.  

• Remitly – A payments platform that has focused on enabling immigrant communities around the globe to send money faster and more cheaply.  

• Ripple – This platform uses blockchain to complete payments in its network of more than 200 banks. Blockchain technology supports the encryption of each payment and the traceability of each transfer. 

• Revolut – This online bank has launched a crypto payment service. Cardholders can access “spend from crypto” in the app and can choose from cryptocurrency holdings to make purchases on their Revolut card.  

FinTechs like these and others are beginning to change the face of the payments industry. For decades payments were completed by a small number of providers, such as credit card companies and Swift. Now, for example, experts are predicting that just the global crypto payment transaction value will rise to more than $16 billion in 2023.ii  

New challenges ahead 

This new explosion in payment networks is good news for consumers – it has the potential to bring lower costs and increased agility in their ability to send and receive money. However, it may also be good news for criminals, because the explosion in payment networks means they potentially have more ways to send money too.  

In addition to this higher overall risk of criminals using new payment networks, compliance officers are going to face other challenges in this new, multi-channel world for payments. New payment networks will also bring: 

• More data formats 

• Different customer use cases 

• A broader range of transaction behaviours 

• Continued acceleration of changes in the underlying data and technology driving these systems 

These new payments networks will bring increased competitive pressures on traditional banks, who will want to be able to offer services that are as agile and easy as this new community of competitors, and often partner with these payment networks – while continuing to meet their existing compliance obligations.  

New technology for a new ecosystem 

To continue to combat financial crime in the face of this rapidly evolving payment networks ecosystem, compliance officers are going to have to engage with a new approach to technology. Existing on-premises financial crime tech stacks are not up to the coming challenges that traditional firms are facing. Instead, compliance teams need a technology solution in the cloud that is capable of delivering transaction monitoring faster, cheaper, and with increased agility in response to regulatory change and the continuing evolution of the payments network ecosystem. They also need a solution that has the capacity to engage with many payment media types, not just several. In addition, competitive pressures – and regulatory concerns – mean that compliance teams should be preparing for the need to adopt technology can already support sanctions and AML transaction monitoring in real-time.  

[i] UK payment markets summary 2022