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What to Know About Payment Risks and Compliance in 2021

Boaz Gam

Boaz Gam


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What You Need to Know About Payment Risks and Compliance in 2021

Article content
  1. Types of Payment Risks
  2. How to Mitigate Payment Risks as a Business Owner?
  3. PCI DSS Compliance in 2021
  4. Payneteasy Fraud and Risk Management Solution

Payments are traditionally considered to be a high-risk sphere. This is due to the complexity of the procedures and tools used, the rapid development of new technologies, and the threat of fraudulent transactions. These risks are dangerous not only for the service providers and their users but also for the economy as a whole. That’s why the payment risks must be identified, monitored, evaluated, and managed. Read ahead for an up-to-date overview of the payment risks and compliance!

Types of Payment Risks

Payment system risks are hazards specific to the structures and operations of payment systems, as well as other entities that participate in the transactions. The following risks may arise in payment systems:

  • Credit risk - a party within the payment system not being able to fulfill its financial obligations on time or at any point in the future.
  • Liquidity risk - an entity not having sufficient funds to fulfill its financial obligations in full on time, despite the fact that it is able to do so at some point later.
  • Fraud risk - illegal and unauthorized transactions that involve stealing funds and/or personal data.
  • Operational risk - factors, such as technical failures or operational errors, causing or exacerbating credit or liquidity risk.
  • Settlement risk - a party defaulting on one or more settlement obligations to its counterparties or settlement agent.
  • Legal risk - a weak legal framework or legal uncertainty causing or aggravating credit or liquidity risk.
  • Systemic risk - violations in the system leading to other parties in the network or financial institutions from other areas failing to timely fulfill their obligations.

This classification is used by most banks in Europe and the United States. The probability of such hazards is never equal to zero, yet there are ways of minimizing it.

How to Mitigate Payment Risks as a Business Owner?

What You Need to Know About Payment Risks and Compliance in 2021

As much as it is useful to be ready to resolve errors, there are ways of mitigating the risk of them occurring. There are a number of international guidelines for minimizing fraud and preventing the risks most payment systems face that are recommended for use in internal regulation. These principles imply the payment system having:

  • A well-founded legal basis in all applicable jurisdictions.
  • Well-defined credit and liquidity risk management procedures that establish the responsibilities of the operator and system participants.
  • System rules and procedures that give participants a clear understanding of the impact that the financial risks which they are exposed to may cause.
  • A high level of security and operational reliability.
  • Back-up payment methods for the timely completion of payment processing.
  • User-friendly, secure, tested, and economically efficient payment methods.
  • Objective and publicly announced criteria for transaction participation, ensuring fair and secure access.
  • Management mechanisms that are effective, accountable, and transparent.

Following these guidelines can provide your business’s payment system advanced protection from fraud and other types of risks. However, the first thing a business owner should take care of in terms of payment risk management is PCI DSS compliance.

PCI DSS Compliance in 2021

What You Need to Know About Payment Risks and Compliance in 2021

A merchant of any size accepting card payments should be compliant with PCI Security Council standards - read ahead for all the details.

What Is PCI DSS?

The Payment Card Industry Data Security Standard (PCI DSS) emerged in 2004. It is governed by PCI SSC and was developed by five major international payment systems:

  • Visa
  • Mastercard
  • Discover Financial Services
  • JCB International
  • American Express

Nowadays, it is the golden standard aiming to prevent data breaches during debit and credit card transactions that have a negative effect on financial institutions and their clients. PCI SSC doesn’t have the legal authority to enforce compliance with the scheme, but following the standard is the IPS’ requirement for all businesses. Besides, a PCI DSS certification is considered to be the best way of securing sensitive data that helps businesses build long-lasting relationships with their customers.

Go ahead and check our comprehensive guide for more information on PCI DSS requirements.

Which PCI DSS Version Is the Current Standard?

Currently, the PCI DSS 3.2.1 is the PCI standard all businesses must comply with. PCI DSS 4.0 was supposed to be released by now, yet its launching date was delayed until the end of 2021. This delay was caused by the PCI council’s decision to extend the Request For Comments (RFC) process and collect additional feedback on the updated standard and its documentation.

While the core twelve guidelines shall remain unchanged, the upcoming renewed PCI version will adjust the standard to the latest technological updates.

The PCI SSC has set four goals for the release of version 4.0:

  1. Keeping the standard up to the payment industry’s changing security needs.
  2. Adding flexibility and extra methodologies to achieve improved security.
  3. Encouraging businesses to view security as an ongoing process.
  4. Enhancing validation methods and procedures.

How to Prepare for PCI DSS v4.0?

As of now, staying compliant with PCI DSS 3.2.1 is enough to be prepared for v4.0.

Thus, the businesses have to continue filling up the Self-Assessment Questionnaire (SAQ). Another action to validate compliance is to engage a Qualified Security Assessor (QSA) to carry out a Report on Compliance (RoC) for your business.

Also, to be well-prepared for the moment when the new standard is introduced, stick to the following recommendations:

  • Use only original usernames
  • Create your own strong passwords longer than 7 characters
  • Don’t keep factory settings
  • Assign every user a unique ID
  • Keep up with the new software patches

Complying with PCI DSS requirements and following the tips we provided above will result in your business having a well-secured payment system. But how to keep all these factors in mind? Fortunately, you don’t have to take care of every little thing yourself - Payneteasy has got you covered!

Payneteasy Fraud and Risk Management Solution

What You Need to Know About Payment Risks and Compliance in 2021

At Payneteasy, we provide our clients with effective risk- and dispute-management tools. Use our tech solutions to achieve high sales with minimum security hazards without any intermediaries. Here’s what we offer:

  • Multi-stage anti-fraud system that analyzes customer traffic and filters out fraudulent card transactions.
  • Seamless Ethoca integration for a decreased chargeback ratio and fraud management.
  • Dispute management tools for PSPs and merchants, including automatic chargeback notifications, convenient display of chargeback status, and chargeback level calculation based on EFT rules. This functionality enables risk managers to reduce the time consumed by data actualization and optimize the risk assessment workflow.

Our powerful risk and fraud management system based on machine learning technologies will enable your organization to manage risks, save money, and keep up an impeccable reputation among the consumers.

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