Industry roundup: 7 January
Global e-commerce fraud prevention tools through the Radar Payments and Red Dot Payment partnership
With e-commerce continuously on the rise, more and more companies are implementing preventative measures to decrease online fraud. Radar Payments, an innovative payment processing provider (dedicated to financial institutions, payment service providers [PSPs], banks, acquirers, issuers and fintechs) owned by BPC Banking Technologies, a global Switzerland-based company, combined forces with Red Dot Payment to provide the latest digital payment technologies to customers around the world.
Radar Payments, as a next-generation payment processing company, was selected to combat e-commerce fraud with fintech Red Dot Payment (RDP), Singapore's largest online payment solution company with e-commerce tools focused primarily on e-commerce and hospitality vertical services.
After review of other fraud detection systems, RDP opted for a fraud management and prevention solution offered as a SaaS model by Radar Payments. According to the press release, their selection was influenced by unparalleled technical capabilities and ease of integration, cost-effectiveness and high-quality account management.
Randy Tan, who initially launched RDP in Singapore in 2011, still leads the company as CEO. Currently, RDP has broadened into other regions with offices in Australia, Indonesia, Taiwan and Thailand. Furthermore, there are tentative plans to expand into Japan, Hong Kong and Malaysia.
According to the Financial Times, RDP was ranked number 35 out of 500 enterprises on high growth companies in the Asia Pacific region, representing a significant revenue growth of 171% compound annual growth rate (CAGR). RDP was also ranked in the Top 10 fastest growing enterprises in Singapore by the Strait Times in 2020. RDP has become a principal member of Visa and Mastercard and an acquirer for AliPay, Diners Club International, WeChat Pay and Union Pay, with payment suites that include AMEX, PayPal, PayLah, PayNow (SGQR) and many other alternative local payment methods.
With cybercrime on the rise due to global digitization, RDP's choice of Radar Payments to manage and prevent payment fraud risk is timely. Radar Payments’ technology is recognized for its superior performance, as well as a proven track record of helping financial institutions and enterprises of all sizes address the vulnerabilities of the digital ecosystem for clients universally.
David Owyong, COO, Red Dot Payment, commented that eradicating e-commerce fraud requires a global approach, and working closely with merchants to help unlock the power of payments. Furthermore, Owyong stated that after overcoming the upheaval of the past 24 months, the hospitality sector will be the next industry that will benefit from tremendous advances in e-commerce. With Radar Payments, RDP will continue to support local merchants in the region and create a secure environment for global businesses looking to serve consumers in Southeast Asia.
VeriCheck acquires ACHWorks to streamline payment processing activities
VeriCheck, Inc. (VCI), an Atlanta-based payments processing services and financial technology solutions provider, acquired Applied Payments, LLC, dba ACHWorks, a technology company and Automated Clearing House (ACH) payment services provider. The integration between VCI and ACHWorks will include personnel expertise and technology systems with a wide array of payments and fintech solutions to drive growth.
Don Singer, CEO, VeriCheck, commented that the acquisition of ACHWorks brings significant benefits to both companies’ customers, offering a wide range of product configurations, advanced technology solutions and improved operations. Furthermore, ACHWorks, the provider of advanced payment technology, facilitates the processing of commercial transactions over the ACH network. The company's unique systems and software provide enterprises with safe and robust access to ACH networks, either via an integration into existing accounting software features or interface or by modernized separate systems. The partnership with VCI builds opportunities for ACHWorks’ employees and further develops the resources available to customers through advanced technologies and superior customer service, added Ryan McCurry, President, ACHWorks.
During 2021, VCI developed the first cloud-based ACH payment processing platform from Microsoft Azure called VEER. This platform is a customizable ACH solution that will enable businesses to quickly move their business to a platform that can help with business growth in a cost-effective and timely manner. VEER replaces VCI's existing ACH processing solutions with customizable APIs, free online platforms and off-the-shelf solutions with no third-party pricing or restrictions for businesses with diverse needs.
The payments industry continues to transform rapidly through both innovations in technology and regulatory standards, stated McCurry. VCI plans to integrate each ACHWorks employee into the present VCI team without the need for redeployment. VCI currently works with local and remote teams in the United States with regional headquarters in Atlanta and Los Angeles.
For more information, please visit www.vericheck.com.
Fintech automation adds open banking data to platform using Finicity
Financial services are undergoing a rapid digital evolution to meet the needs of digital consumers. According to Finextra, Americans using fintech services on a daily basis increased from 37% in 2020 to 48% in 2021.
The initial step to implementing a new fintech application is to create a new account. Slow and time-consuming background checks, eligibility requirements, ACH micro-deposits and inadequate credit ratings are all major sources of friction and can lead to abandoning the account setup process. By establishing a secure account verification system, Finicity's open banking data integration can reduce friction and eliminate delays.
Andy Sheehan, President and COO, Finicity, a Mastercard company, commented on the importance of establishing accounts through financial institutions in the most secure manner. With open banking data, the friction and risk associated with opening a digital account is significantly reduced. The integration between Finicity's open banking platform and FinTech Automation (FTA) enables consumers to manage their financial data and their financial futures more effectively. Furthermore, the partnership adds secure account verification and automated personal financial management capabilities to Infrastructure-as-a-Service (IaaS).
The Finicity agreement grants access to consumer-permissioned account data so that FTA customers can securely validate their newly opened account. Additionally, this enables consumers to link their primary account to deposit funds into a new investment account, eliminating the cumbersome authentication methods such as micro-deposits, and minimizing the risk by verifying ownership of existing accounts. David Park, Founder and CEO, FinTech Automation (FTA), commented that integrating consumer-permissioned data from Finicity’s open banking network streamlines the opening and funding of accounts in a secure, easy and expeditious way. This is an illustration of how open banking can improve banking and personal financial management services and customer service at the same time.
The FTA will also utilize consumer-permissioned data from Finicity's open banking platform to give consumers an all-inclusive view of all of their financial and asset accounts. Customers will be able to download all transactions from their wealth accounts into their personal financial management tools through FTA’s Unified Business Platform.
In the beginning of the fintech evolution, fintechs helped consumers better visualize what was happening with their funds in a variety of accounts, providing a better user experience. Now, digital applications and interfaces have changed the way consumers perceive financial services, but the underlying systems that provide these products and services have not evolved. FTA and the FinServ IaaS, an open platform for FTA, provide financial institutions and other fintech companies with a core banking, payment and asset management accounting system across multiple financial sectors in order to meet this growing market opportunity.
Currently, the FTA platform can operate across multiple financial disciplines, minimizing the cost and complexity of creating and installing financial applications with inherent complexity. Furthermore, the system will enable financial institutions and fintech companies to build value-added services into their existing products, providing a better customer experience and the opportunity to increase profitability. FTA’s B2B customers will shift their technical burden to FTA, enabling these businesses to focus on customer relationships and provide new services. In order to further increase customer relations and profits, these businesses will be able to provide a quick, simple and safe method to launch financial services such as banking, card, asset management and payments.
The FTA platform provides a single point of access to different types of accounts and services through a single point of entry. It also provides a unified compliance, regulatory and KYC/AML, in addition to superior providers through a single secure integration with Finicity's open banking platform.
BNPL to impacts credit reports according to major credit reporting agencies
Lenders are becoming increasingly short-sighted with the lack of data provided as short-term payment plans for small items continue to grow at a rapid pace. Buy Now Pay Later (BNPL) has shown an increase in concern and credit risk for consumers, according to the American Banker. The BNPLs in US-based upscale and discount retailers offer plans with online checkout, while other merchants also offer them onsite in stores. However, these plans often do not appear in credit reports, which create a blind spot for lenders who use the information in the report to assess an applicant's ability to repay. Additionally, these "pay-in-4" plans are regularly used for small-ticket items such as clothing and cosmetics and are usually charged directly to the purchaser's debit or credit card. For example, a $200 purchase requires an upfront payment of $50 and three additional payments of $50 every two weeks.
According to the American Banker, Equifax will add a business industry code to categorize BNPL data such as payment history in the next few weeks. This will allow BNPL loans to appear in credit reports. According to Equifax, this will allow customers and scoring partners to choose how to incorporate BNPL payments into their new financial services decisions. TransUnion is in the process of creating its own BNPL credit reporting service. Mark Begor, Chief Executive, Equifax, commented that accountable lending procedures benefit from a more complete representation of an individual’s financial obligations. Billions of debts have yet to be reported. Afterpay Ltd., a BPNL company, stated that they made US $9.8 billion in pay-in-4 plans during the 12 months ended June 30 in North America in 2021, more than double the year before. Klarna Bank AB transactions in the US totaled $3.2 billion during the first half of 2021, up from $722 million during the same period in 2020. These payment plans are small, with average transactions of $150. However, they can add up substantially if buyers use them frequently.
Implementing short-term instalment plans to credit reports has proven a technical issue for credit reporting agencies. Most credit reports do not have the functionality to include biweekly payments. There is often a delay between the consumer opening an account and the lender sending that information for inclusion in the consumer credit report. The loophole can quickly exceed the repayment period.
There are also BNPL transactions for larger items that are recorded in the credit report in the same section as a personal loan. In most cases, only a few of these small short-term plans that do not require a credit check will appear in a credit report.
Only a small number of BNPL enterprises submit information about these plans to Experian PLC. Experian is working with BNPL companies to include details of this information in their reports.
Two of the largest companies in the industry, Afterpay and Klarna, currently do not report their pay-in-4 plans to US credit bureaus. Another firm, Confirm Holdings Inc., does report a complete payment history for some loans, including timely payments and defaults. However, the firm does not report pay-in-4 plans. These three companies are discussing the possibility of reporting these plans with the credit bureaus.
One of the obstacles faced by companies is the frequent opening and closing of accounts that can affect creditworthiness. Companies that allow buy now and pay later want to prevent customers who pay invoices on time from being punished for repeated use of short-term payment plans.
Equifax plans to complement the pay-in-4 information to credit score reviews starting in February 2022. Equifax stated that on-time payments, defaults and additional payment information will be covered in the report and will provide consumer’s credit score information.
BNPL plans also provide some advantages to consumers with limited credit history or those who are not eligible for credit cards or other traditional loans. According to Equifax, consumers who pay their invoices in a timely manner will benefit from the plan in their credit report. Furthermore, an Equifax study showed that consumers with thin credit files or no credit history for more than two years realized an average FICO credit score increase of 21 points compared to the typical borrower averaging 13 points.
The new credit reporting data is expected to include the time when the payment plan started, the consumer's planned payment, and the actual payment made.
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