Over the past few years, there has been a sea-change in the position of compliance among payments companies. Previously, the three chief concerns of compliance officers had been minimising cyber-risk, furthering operational resilience, and digitising compliance procedures. Therefore, the focus was mainly on risk.
A change is coming
For 2022, however, the emphasis has shifted to more strategic objectives, notably, support for entry to new markets and for new product licensing. The graph, taken from VIXIO’s just-completed 2022 Payments Compliance Outlook survey of 113 senior legal, compliance, and regulatory executives at international payments companies, demonstrates the change clearly.
The pandemic was the main catalyst for this development. The crisis led to a flurry of regulations that were an immediate priority for most compliance teams, but the surge in online transactions for almost everything – not just B2C sales, but across the entire chain of distribution and supply – quickly became the main focus of attention.
By January 2021, as Graph 2 shows, year-on-year growth in online trade had jumped by about 40 percent. Although that rate of expansion is unlikely to be sustained, it has kicked the existing uptrend into a higher gear (Graph 3). The acceleration should be maintained for the medium term, at least, with up to 10 percentage points added to the previous growth rate.
The purpose of repositioning compliance as a business enabler, rather than a tiresome hurdle or a profitless expense, becomes clear from these developments. If your payments business is to thrive in a world that embraces online sales more rapidly and in new markets, you must up your compliance “game”.
Despite the advances made in cybersecurity, the internet remains fraught with risk. Identity theft, money laundering, non-completion, ransomware, hacking: all and much more have proliferated as pandemic restrictions have slashed income and, thereby, sharply increased the incentive to “go criminal”.
Simultaneously, working from home has made compliance oversight much more difficult (and, to a significant degree, seems to be here to stay).
All of these risks must be evaluated and contained, along with a constantly-shifting regulatory landscape, before expansion strategies are implemented.
The first reaction of the payments industry to the opportunity presented by COVID-19 lockdowns has been to throw more bodies at it. Graph 4 is also from VIXIO’s recent survey of the pandemic’s effects. It shows a substantial increase in compliance headcount.
When it comes to the crunch, therefore, and despite the survey’s clear evidence of a new understanding of compliance, the majority of practitioners remain risk-focused. Although understandable, that approach is reactive, not proactive, and unlikely to be the most effective solution for the longer term.
The way forward is to build on the newly-established recognition of the increased importance of compliance shown in Graph 1. By making compliance an integral element in strategy formulation, your organisation’s business development can be driven by a fully-rounded plan that takes due account – well in advance – of the risks and regulatory exigencies affecting new markets or services.
All of the regulations are posted online, accessible to everyone who searches for them. But it’s not about gathering lots of data; it’s how that information is updated, collated, analysed, and interpreted. All that work must produce relevant and actionable results for each organisation’s particular circumstances. The tools are already available.
For more than 15 years, VIXIO has applied human intelligence and automation to the Herculean task of tracking, analysing, and evaluating the world’s varied and constantly-developing regulations to resolve the particular needs of its clients.
For more than 15 years, VIXIO has applied human intelligence and automation to the Herculean task of tracking, analysing, and evaluating the world’s varied and constantly-developing regulations to resolve the particular needs of its clients. The upshot is a service that enables your compliance team to focus more effectively on its developing role at the forefront of business strategy.
That doesn’t necessarily mean a reduced compliance headcount. What it does mean is a reduced need for manual, labour-intensive regulatory monitoring. In turn, that means the team can – indeed, must – comprise a greater proportion of planners and preparers, working from data and research that are tailored to their purposes. In short, a smarter team; one that sees itself shaping the organisation’s destiny, not just keeping it compliant.
That phrase, “sees itself”, is crucial. It implies that compliance personnel must change the way they think about their role in an organisation. The culture underlying the compliance function must develop along new lines.
Although supervision and enforcement will always be part of the job, the greater requirement now is to incorporate strategic thinking into the compliance mindset. The head of the team must set the standard. To facilitate that, they should be a permanent member of the executive committee, not only fully informed of the management’s plans but also an active initiator of ideas.
State-of-the-art tools will foster that change of outlook. Being able to tap into the latest regulatory intelligence and analyses from VIXIO, the compliance chief can see where the opportunities for new markets and licences will yield the greatest return with the least or most manageable risk. They can see where the pitfalls lie and devise appropriate stratagems to deal with them.
Today’s compliance specialist must not be just a guardian; therefore, ever quick to rain on management’s parade of new business ideas. They must be a prime enabler of those plans, ensuring they are truly the best they can be.
It is a widely-touted aphorism that, beneath the danger that every crisis presents, there is always an opportunity. The pandemic and the concomitant explosion in online transactions illustrate that idea particularly well. The dangers were recognised early on and the payments industry responded promptly and comprehensively.
The opportunity has, so far, been less fully recognised. As our survey discovered, there has been a major re-evaluation of the purpose of compliance, but the urge to raise headcount suggests a knee-jerk, not an embrace. This remains a work in progress.
If you are among those who, as VIXIO does, see the potential for compliance to be a competitive advantage, you should download our report on the 2022 Payments Compliance Outlook: The Paradigm Shift Towards Growth. You can use it to benchmark your priorities against those of compliance and risk leaders worldwide.
Apply those insights to your own circumstances, and you’re on the path to advancing your organisation’s compliance function from business supporter to growth enabler.