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Due diligence challenges for the payments industry

The payments industry is welcoming the digital revolution with open arms, but this new wave of technology brings with it new problems and challenges. A company must now undertake proper due diligence on clients and individuals to ensure financial security and prevent any irregularities. Continue reading to discover why due diligence is important and the challenges facing the payments industry.

Challenges the payments industry faces

The payments industry faces huge challenges regarding fraud and money-laundering scams, which could cripple some companies and even prevent them from paying employees or fulfilling invoice payments.

The growth of online payments and banking has given scammers a new avenue to attack when targeting individuals and companies. To remain competitive in an ever-evolving digital world, companies are opening themselves up to more difficult challenges.

It is for these reasons that businesses must do their due diligence for prospective clients and customers to ensure the long-term success and survival of their company.

Importance of due diligence

There are many reasons why financial institutions and companies commit time to proper due diligence, and they are:

  • To ensure the customer really is who they say they are
  • Guard against fraudulent activity like identity theft or impersonation
  • Ensure the company remains compliant with laws and regulations in the region or markets they operate in
  • To assist police with financial irregularities

When committing to doing due diligence checks, a company collects a range of information about a customer to determine if they are who they say they are. This includes the identity of the customer, including their name and address, as well as the activities they’re engaged in and the markets they operate in.

Due diligence will also determine the customer or client’s risk profile and how likely they are to be involved in activities that could expose a company to potential fraud.

Know your customer

Due diligence is also a major part of meeting the Know Your Customer (KYC) standards.

KYC checks are part of a set of banking regulations that are used for verifying the identity of clients. They are key in preventing direct debit fraud, and ensure that customers are who they say they are, and live where they claim to live before a Direct Debit is set up and taken. Know Your Customer checks are mandatory for paperless Direct Debit sign-ups.

As a business, KYC helps minimise risk and helps to protect against bribery, fraud, money laundering, and other serious crimes.

Failure to do due diligence as a business can put the company at risk.

Risk-based approach to due diligence

Many international KYC standards require financial companies to take a risk-based approach to due diligence of prospective customers and clients. These heightened standards mean that customers that potentially pose a risk will be subject to increased due diligence checks.

Different levels of due diligence will be applied depending on the nature of the customer’s or clients’ relationship with the bank and their risk profile.

The main risks the enhanced due diligence aims to mitigate are:

  • Money laundering
  • Fraud
  • Terrorism funding
  • Sanctions-busting

How Interbacs helps with due diligence

At Interbacs, we can give you greater control over managing your risk profile and customer due diligence. In the current climate, where the digital world has become so integral to business, companies need to adapt to changing circumstances more than ever.

We can give you the peace of mind that you’re dealing with legitimate customers, and that your information is being handled appropriately, that your Direct Debits Management is seamless and streamlined, and that your financial and reputational risks are minimised as much as possible.

Save time and money with reliable, professional, and innovative payment solutions and services from Interbacs. For more information about any of our products or services, contact us today on 08444 127 180.