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The Future of Compliance

Post Categories: Blog

How using predictive analytics can decrease
compliance costs

Reactive vs. ProactiveWith regulations changing in payments, some financial institutions seem to be reacting to fear when dealing with their TPPPs and originators, rather than enhancing their boarding and compliance processes. With just a few adjustments, companies can keep variety in their portfolio, while still adding revenue in a fast, efficient manner.

The struggle with compliance needs was recently highlighted when Citigroup disclosed that the finance industry could spend as much as $10 billion annually in order to combat money laundering. This, along with the fact that compliance issues in 2013 caused M&T Bank to lose close to 18% in net income, has led to many questions. The payments world is left wondering: “why is so much spent on reactionary instead of precautionary measures?”


Don’t let compliance destroy innovation

While compliance should always be a key factor when assessing your portfolio, it shouldn’t stop you from taking on some level of risk. As long as they are taken with a measure of precaution, calculated risks can be a great way to grow your portfolio and ultimately increase revenue.


There is no “cookie cutter”; one size fits all risk tolerance. If you decide that you can take on a higher risk tolerance, and you board ‘higher-risk’ merchants, you should make sure to monitor them thoroughly and regularly, in order to remain compliant and aware of your TPPPs, originators, and merchants.


With thorough and regular monitoring in place, keeping a watchful eye on the goods and services they are selling is easier to do. With this level of monitoring, you are able to catch fraudulent or brand damaging content earlier, limiting the negative repercussions.


Speed up the process and reduce costs

With an increased interest in Big Data and what it can do for a business, it would be more profitable to use that $10 billion in a proactive way, using tools that better predict merchant profitability and risk.


These days, inaction is being treated as wrong action, especially in ACH compliance. Worse than not fully knowing your merchants and their activity, is having the information but not knowing how to use it to your advantage. By predictively analyzing key data sets, you can connect past data points to predict and better understand future behaviors – mapping past relationships to predict future outcomes.


Having in-depth knowledge of your customer’s past can better prepare you for future decision-making. By being fully aware of your customers and your business needs you can use the power of predictive analytics to form a plan and remain compliant, allowing you to grow your client base as well as revenue.


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