Industry Perspective

An open dialogue about emerging payments risks

February 2010

The Retail Payments Risk Forum (Off-site Link) hosted its third annual conference — Emerging Retail Payment Risk Issues: An Industry, Regulatory and Law Enforcement Dialogue — at the Federal Reserve Bank of Atlanta in November 2009. The conference provided a venue to discuss emerging risk issues in the dynamic retail payments environment. Breakout sessions were designed to identify actions participants can take to collaboratively address risk issues.

Emerging payments create challenges and opportunities

Key conference themes focused on challenges and opportunities for payments risk management in an environment of technological change. Presenters focused on these areas of discussion:

• The keynote speaker highlighted the fact that financial services companies must adapt to an array of transformative technologies in a time when consumer confidence and trust in financial institutions are threatened. Also, nonbanks continue to enter the retail payments marketplace to compete with regulated financial institutions for market share.
• An expert panel spoke on emerging payment market developments. Panelists outlined the trends and risks in new payment channels and devices, noting that contactless devices, mobile commerce and social networking platforms are areas to watch. The person-to-person payment area is particularly ripe for innovation.

Critical elements of effective risk management

Alternative payment types and new providers can lead to increased security and fraud risks, requiring increased public and private engagement to promote effective risk mitigation practices industrywide. This is difficult as many financial institutions’ risk management efforts can be fragmented by payment delivery type. Newer fraud schemes, such as corporate account takeovers — resembling corporate identity theft — can be combated effectively with current risk management tools if properly implemented.

Growing threats from data breaches and cyber crime

The growing threats to cyber security by global crime rings represent significant, ongoing, industry challenges, as detailed below:

• Panel experts identified private and public partnerships and initiatives in place to respond to increased fraud in retail payments, and improve the resiliency of the financial services sector
• Law enforcement representatives examined trends in criminal activity and recent successes in shutting down global crime rings
• Industry practitioners confirmed the need for better information sharing with financial institutions and law enforcement agencies to prevent criminals from migrating across payment systems and financial institutions

Conclusion

This event offered participants an open dialogue to discuss trends and issues of the day, as the payments industry, regulators and law enforcement all seek to work together to understand, mitigate and deter risks and fraud in the emerging payments environment.

Clearly, further work remains to be done, and the landscape is ever changing. But the challenges faced are common to all parties, presenting an imperative for common understanding, information sharing and continued collaborative action.

Presentations from the annual conference are available on the Retail Payments Risk Forum Web site (Off-site Link).

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