Last year’s challenges in financial crime will gather pace in 2021
As Covid-19’s shadow continues to stalk economies as we move into 2021, the stakes are high for merchants and institutions alike to adapt to the challenges it presents, according to new report on financial crime mitigation.
2021 has kicked off with banking industry body UK Finance pushing for the contactless payment limit to be raised to £100, only months after it was upped from £30 to £45.
This would open the door to almost the entirety of day-to-day shopping being conducted in this way. The previous increase saw contactless spending account for 64% of all debit card transactions and 46% of credit card transactions, according to UK Finance.
These numbers would be given a further surge by the upper limit for a contactless more than doubling.
However, as with any developments that increase payments’ speed and efficiency, this will increase the pressure on financial institutions to protect customers from fraud, which can in turn cause greater friction.
This is one of the trends explored by financial crime prevention software provider, Featurespace, in its ‘Financial Crime Viewpoint 2020-21′ report.
Exploring the sizeable decline in the use of cash since Covid-19 struck in early 2020, the report explores the requirements that were placed on merchants and financial institutions, while also adapting to working remotely with distributed teams.
This could prove detrimental to the process of investigating and monitoring the security of transactions, leading to some being incorrectly classified as fraudulent.
“The consequences stretch beyond customer friction; cases incorrectly classified are the results of models (often rules based) not detecting ‘true’ fraud, leading to an increase in false positives,” the report claims.
“With this inefficiency, more friction occurs in the shopping experience – leaving customers frustrated and the threat of loss of revenue for the rest.”
On top of increased contactless transacting is of course the greater proportion of spending taking place digitally due to fewer bricks-and-mortars retailers being open.
Featurespace claims that the last 12 months saw more data breaches than ever before, with the threat that this will continue going forward as more online accounts are opened.
The report predicts therefore that GDPR will become “one of the most powerful pieces of data legislation worldwide”, and that any merchants playing catchup with this and other regulation such as PSD2 can expect more fines to come their way in 2021.
However, the broader lesson of 2020 is that it is impossible to predict what challenges are lurking around the corner, so financial institutions and merchants alike must be prepared to collaborate and take a flexible approach in order to deal with what they are faced with.