How P2P payments firms are using technology to overcome compliance pain points

The peer-to-peer (P2P) payments industry is set for rapid growth over the next decade, with well-positioned payment service providers (PSPs) benefiting from a forecast $7.2bn increase in the sector’s global value. While the future looks enticing, sector participants have some important pain points to overcome, arguably the biggest of which is regulatory compliance.

To succeed in this space, payment services providers (PSPs) need systems and procedures capable of onboarding customers and processing transactions at speed and scale in a secure and compliant manner, often across multiple countries and jurisdictions.

This is no easy task when you take into account the number of countries involved, variations in the regulatory approach from one jurisdiction to the next and the long list of government-issued documents consumers use to complete the onboarding identity verification process.

Understanding the complex regulatory landscape

Luckily many jurisdictions share a core set of compliance regulations around Know Your Customer’ (KYC) and anti-money laundering (AML) risk.

The US’s main KYC/AML regulations, for example, require PSPs to register with the Department of Treasury and maintain a fit-for-purpose KYC/AML program. This includes sharing currency transaction reports (CTRs) with authorities when transactions exceed $10,000 and filing suspicious activity reports (SARs) when a PSP has reason to suspect criminal activity is taking place.

Beyond simply understanding KYC/AML regulations and reporting suspicious transactions, P2P payments providers must also conduct regular risk assessments and create and follow policies and procedures to ensure they remain compliant.

The risk assessment process in the US and many other jurisdictions involves identifying specific risk categories, such as products, services, and geographic locations. Products and services that fall into the higher-risk category include third-party payments and foreign exchanges.

Identifying and reporting high-risk-transactions

Meanwhile P2P payments firms should flag transactions to higher-risk international locations, for example countries that are subject to sanctions, those that have been identified as supporting international terrorism or offshore financial centers. For domestic transfers, higher-risk locations include those that have been flagged as high-risk drug trafficking and financial crime areas.

Conventional financial institutions often struggle on a day-to-day basis with this level of complexity. For P2P payments platforms, however, where potentially huge numbers of transactions are being conducted in near real-time, the compliance challenge is even greater.

The success of companies within the P2P payments sector clearly depends on their ability to establish a bedrock of systems and processes that will enable them to balance swift and seamless customer experiences with the need to be fully compliant.

How the right technology can fast track compliance

Technology and automation play a decisive role in helping PSPs achieve this delicate balance in a profitable way. Market-leading PSPs are now using an AI-powered KYC/AML solution called identity verification (IDV) to automate customer onboarding. The result is an onboarding process that is compliant, speedy and secure and requires no laborious form filling, manual processing, or long wait times for final customer verification.

The IDV process involves the customer taking photos of their government-issued identity documents (such as a driver’s license and passport) and then taking a selfie of themselves in real time.

Veriff’s IDV solutions recognizes ID documents from across the globe and it verifies customer identity in just six seconds, enabling PSPs to onboard 30% more customers while achieving a high level of regulatory compliance.

Adopting a leading IDV solution, such as Veriff’s, is a clear choice for high-growth PSPs that are unwilling to compromise on either customer experience or KYC/AML risk.