Risk controls in the balance: managing friction vs. convenience in the payments industry.

By Global Banking & Finance Review -By Jed Rose, EMEA General Manager at Airwallex


Breakthroughs in consumer payments have forged a path for B2B innovation to follow. In particular, the consumerisation of payments has driven demand for employees to be able to make and receive payments at work with the same ease, transparency, and frictionless experience as they do in their personal lives. While this wave of innovation is clearly reflected by the growth capital flooding the market, the industry must question the ever-present “need for speed” and consider what a suitable level of “friction” in the payments system looks like.

The risks of real-time B2B payments Real-time payments are familiar in consumer use cases, but less so in B2B payments. Large amounts of cash flowing between businesses require certain compliance checks. For example, if transaction flows do not align to the expected flows for a company, it can require additional diligence to understand the business and their payments better. Checking that a large transaction matches the transaction profile of a business can take some time.

Compliance must be taken seriously to not only meet regulatory standards but also reduce the risk of fraud. Fraudulent transactions are commonplace globally – both at work and at home. On the consumer side, the latest UK figures show instances of fraud when individuals are tricked into handing over money and personal details surged by 71% compared with the first six months of last year. This epidemic of fraud in consumer payments has led to the launch of new services, like Nationwide’s new Scam Checker Service, to help consumers avoid falling victim to fraudsters. We’re at a crossroads now where we may eventually see a reversal of the consumerisation trend, with more B2B models and risk checks being adopted in consumer offerings to manage the threat of fraud and manage the speed of payments to be as quickly as possible. Ultimately, real-time payments can come at a cost – fewer checks, and more fraudsters getting lucky.

Closing the gap to achieve quicker secure payments Technology is creating an advantage of scale, thereby enabling faster, more secure payments.

The bigger organisations get, the more data they have, and the more machine learning (ML) comes into play. This is vital for risk mitigation. By layering ML and automation into risk controls, it is possible to identify suspicious transactions or other anomalies which need further investigation quickly, without slowing down every transaction. For example, an unexpected transaction to a new geography which doesn’t align with a company’s historical data creates an alert so it can be looked at more closely. With worldwide scale, those in the payments industry can have more confidence and conviction in knowing their customers’ transaction profiles inside-and-out to identify suspicious activity and get payments approved faster.

Give the customer what they want Customer expectations are high, whether you’re thinking about the consumer at home or the employee in the office. Due diligence and security need to go hand-in-hand with providing a “one stop shop experience” – one simple interface with real-time visibility that makes it easy to control all transactions. By removing all possible friction in terms of user experience and service, customers will have a good experience while simultaneously feeling reassured that suitable checks are in place. They may want quick transactions, but they also want to know the right due diligence is being undertaken to protect their funds. Banking models and the wider payments industry will always need to have this at the core of their services. There has to be an industry focus on making sure the tail doesn’t wag the dog; the link between “frictionless” and real-time payments in our personal lives shouldn’t demand replication in business at the expense of security.

Remove unnecessary friction, not risk controls The consumerisation of B2B payments has sparked innovation to enable the same convenience and ease-of-use as in consumer payments. This is a positive development, but it’s important to not go as far as confusing “frictionless” with real-time payments – compromising security and making businesses more exposed to attacks by fraudsters.

Appropriate security and compliance measures are a requirement for the long-term sustainability of both traditional players and disruptive fintech companies. As the world becomes more open and connected, there will be faster ways to send funds to more places. The trick will be removing all unnecessary friction – poor user experience on digital platforms, slow customer support etc. – and deploying technology to speed up B2B payments without throwing caution to the wind. In this way, the industry can keep innovating to find a suitable level of friction that only hinders fraudsters, not customers – and learns along the way to make the fastest and safest customer experience possible.