More and more, consumers globally are ditching cash and adopting digital payments. They expect a seamless customer experience and faster transactions. This can cause financial institutions and businesses to face new challenges in payment monitoring.
According to a report from the U.S. Public Interest Research Group, in the last few years, consumer complaints about mobile payment apps and digital wallets have skyrocketed. The three most common complaints were problems with managing accounts, fraud or scams, and problems with transactions (including unauthorized transactions).
Research from Accuity estimated that in 2020, US$118.5 billion was lost in fees due to failed payments. Since in some countries digital payments account for nearly 80% of all payments, it can be assumed that most of those failures and lost fees were for digital payments.
As the payments market is competitive, failed payments mean not only an increased workload for the staff, but also customers potentially lost to a competitor.
For some financial institutions and businesses, adopting digital payments helps streamline the payment ecosystem. For others, it becomes a constant struggle to keep up with emerging technologies and the risks that come through digital channels.
Digital Payment Monitoring Challenges
1. Too much data from too many sources
The nature of digital business is fast-paced: new technologies and payment regulations appear and evolve almost every month. Instant payment services, such as FedNow in the USA and Real-Time Payments Rail (RTR) in Canada, will make transactions instant and irrevocable. This makes real-time transaction monitoring even more critical for financial institutions and payment providers. If payment monitoring is done separately by multiple departments, some important data and context might be missing, making it harder to spot anomalies or errors. Disparate data sources and lack of data sharing between teams can prevent your organization from identifying the true cause of a payment failure. For merchants, who can’t see the entire payment journey and don’t usually have the capacity to block fraudulent payments, the problem is even worse.
2. Too many false positives
As their online payment volumes increased, many merchants and financial institutions strengthened their fraud prevention efforts, resulting in another challenge – too many false positives. Falsely declined transactions are a double whammy in that they not only leave customers frustrated and give them reasons to switch to a competitor but additionally, businesses lose more from blocking legitimate payments than from fraud losses themselves.
3. Constant cybersecurity threats and payment fraud
A study from Juniper Research predicted that retailers will lose some $130 billion to digital card-not-present (CNP) fraud between 2018 and 2023.
Every year, we hear new stories about serious cyber attacks or elaborate financial crime schemes. And even though there are a variety of cybersecurity solutions and fraud detection tools on the market, it’s hard to keep up with the crooks.
4. Human errors and too much manual work
The above-mentioned Accuity report also showed that globally, over one-third of payment data elements are still validated manually and two-thirds of organizations identified reducing manual processes as extremely challenging. The more manual work there is, the more potential exists for human error. If your staff review transactions under pressure as something is actually happening, the stress itself can be a factor in missing important information. It is harder to be efficient when you are under the gun.
5 Steps for Smarter Digital Payment Monitoring
1. Optimize data acquisition in one platform
To gain control over your data and get maximum insight into the payment performance, you need a consolidated view of the entire payment chain. Solutions with machine learning capabilities and AI, built for payment environments, can help you perform automated profiling of each payment to identify connectivity issues, bottlenecks, failures, or unexpected declines.
2. Perform real-time transaction monitoring
In 2022, real-time payment monitoring is not a luxury, it’s a must-have. If you don’t have instant access to data, you won’t be able to proactively deal with troubleshooting, cybercrime, or potential payment failures.
Every week there are stories of fraudulent transactions related to e-transfers. For example, customers of a Canadian bank lost their money when cybercriminals logged into their accounts, e-transferred funds to their own accounts, and then cashed out. New solutions for real-time monitoring that use supervised and unsupervised machine learning models combined with behavior analytics are able to spot the anomalies on the fly based on certain actions taken by the fraudsters.
3. Prioritize online payment security
Businesses and organizations whose revenue depends heavily on their online presence, and who process digital payments, face continual threats from cybercriminals. Recently, we have observed more and more cases of crime convergence, where fraud, AML, and cybercrime constitute one serious incident. Strategic prevention should be the key to improving the protection of your business and customers. Businesses need to think like criminals. Since perpetrators are looking for a system’s weak points, businesses should trace the flow of crime to come up with an optimized internal structure when planning their defense. Criminals don’t make a distinction between AML, fraud, or cybercrime. They simply act based on whatever gaps in the system they can find.
If you perform the end-to-end transaction monitoring in real-time, supporting it with strong payment fraud detection and blocking technology, you can significantly reduce the risks of revenue and reputation losses.
4. Reduce false positives
According to a survey by Sapio Research, 33.0% of U.S. consumers drop online merchants after false declines. The more precise your tools for payment monitoring and fraud detection are, the better your chances of blocking only the suspicious activity, while allowing the legitimate transactions to complete.
Look for technologies that automatically learn from identified fraud cases and are then able to detect fraudulent behavior patterns based on those previously confirmed fraud cases. Further, they should also be able to spot anomalies on the fly and flag new threats. Ideally, your team should be able to block specific users or transactions without impacting legitimate transactions that occur along the same pipe.
5. Reduce manual review
When it comes to digital payments, speed is of paramount importance. When payments are almost instant there is no time to review anything manually, and automaton is key for reducing payment failures. Your technology should be able to automatically and independently audit the end-to-end journey of every transaction in real-time, across multiple network links, switches, and applications.
A Customer Story
Bankalararası Kart Merkezi — Interbank Card Center (BKM) faced a few challenges with the increase in digital payments. More digital channels and payment gateways, increased customer demands, and an average 10-15% increase in transaction volumes per year meant that BKM needed to significantly change the way they managed and responded to performance issues within their service environments.
While BKM had the ability to partially monitor internal switch application messages from database log tables, it was challenging to easily analyze these in relation to the external formats of transaction messages. Knowing that undetected transaction failures and slowdowns have a negative impact on both BKM’s service level delivery as well as their member institutions’ end customers, BKM turned their focus to establishing end-to-end visibility into the lifecycle of every transaction.
BKM chose the INETCO Insight® real-time transaction monitoring and data streaming solution for collecting, correlating, and decoding all message data fields in every end-to-end transaction.
“The holistic, real-time view BKM gained with INETCO Insight has resulted in faster engagement of the right resources who can immediately investigate the issue. We have been able to drop our average mean-time-to-repair from hours and days to a couple of minutes.” ALI BÜNYAMIN SERTER — VP, SWITCH SYSTEM APPLICATION DEVELOPMENT
Digital Payment Monitoring with INETCO Insight
Built specifically for banking and payment environments, INETCO Insight provides an independent view into the performance of every payment – across the payment journey. We help our customers optimize operations, meet payment transaction monitoring compliance regulations and reduce payment transaction failures by >25%.
INETCO Insight is designed to capture TCP/IP data off your network, meaning the collection and correlation of your transaction data does not require heavy instrumentation, extra traffic loads, or any code changes to the payment switch. Our platform is vendor-agnostic and can be scaled to monitor any custom, packaged, and industry-specific application within physical, hosted, virtual or Cloud-based production environments.