An End-to-End View of Risk in Payments. Introduction to the Risk Spectrum and Mitigation Strategies Sayantan Chakraborty North America Head of Payments Citi Global Transaction Services Brian Todd VP Fraud Prevention and Internal Control Citi Global Transaction Services. August 09, 2010.
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Introduction to the Risk Spectrum and Mitigation Strategies
North America Head of Payments
Citi Global Transaction Services
VP Fraud Prevention and Internal Control
Citi Global Transaction Services
August 09, 2010
Old Payments Landscape
New, More Complex Landscape
The new payments market presents Banks and Treasury Operations with a new set of challenges as well as opportunities
In order to minimize risk in the new marketplace, key stakeholders mustbe at the forefront of innovation,prioritize controlsin infrastructure andbe nimblein an increasingly complex environment
Payment Systems Risk
How can Banks and Treasurers collaborate?
Banks can share best practices, market updates and operationally make it simpler for you to remain “compliant”, e.g. building controls universally within banking processes
Factors Affecting Operational Risk
Many banks offer treasury outsource functions and products that can be used by treasuries to reduce operational costs and risks; some of the contingency management can be handled by Banks instead of building multiple redundancies
Law firm scams have significantly increased bank’s and counterparty’s risks
Organizations can mitigate credit risk by carefully evaluating their counterparties and by protecting their security interest in such relationshipsCredit Risk
Banks can help mitigate the payments systems risk through a disciplined risk evaluation of the payments infrastructurePayments Systems Risk
Banks as participants in payments systems, are deeply involved in risk evaluation. The payment system benefits from the collective evaluation
Due to the batch processing nature and the regulation governing ACH transactions, there are risks that organizations should be cognizant ofACH Transactions
“If Facebook were a country it would be the eighth most populated in the world, just ahead of Japan, Russia and Nigeria “ *
101% increasePayments in the Age of Social Network
ᅡ(As of March 2010, Source: nicburcher.com )
US Virtual Goods Revenue ($MM)
Source: Piper Jaffray, “Pay to Play: Paid Internet Services”, July 13, 2009
Growth of Facebook Users (MM)
* Owyang, J. (2009). A Collection of Social Network Stats for 2009 Retrieved March 20, 2010
** Source : www.hci.org : “Social Networking in Government: Opportunities & Challenges”
Next Generation Payments
The new TwitPay will provide a means of quick and easy donations for Twitter users using “retweets”
Charities looking for donations can simply tweet a request, and donors can respond by retweeting the message, which opens up a authorized payment transfer from the users account
TwitPay collects up to 5% on these transactions
Traditional P2P on Facebook
P2P for Charity on Twitter
Authenticating the actual user or payor becomes increasingly difficult
Sophisticated hackers can steal or create false identities easily
Information security becomes increasingly important as social network IDs are now linked to user’s payment accounts
State and Local Governments are grappling with today’s economic realities
How can Banks help?
The Direct and Secondary Impact of Fraud
International check payments for a major public sector entity were intercepted at a mail vendor and tampered to fraudulently withdraw funds
What went wrong?
Regulatory environment is increasing the financial burden on Treasury Operations
Risks to Treasury Operations are significant and are constantly evolving
Fraud is increasing in sophistication
New payment channels are also giving rise to new risks
Banks can provide expertise to mitigate payments risk at a lower cost
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