Paynovate: High Risk as Low Risk

This is the third in our blogs which takes a look at high-risk banking. Now we’re going to examine the current trends in the high-risk banking sector and how businesses can adapt, especially from the point of view of the Paynovate mantra, High Risk as Low Risk.    

We have already discussed in the first two blogs of this series that businesses need to be very aware of their risk profile.

And being considered high-risk is a wider interpretation than many think, it can mean all manner of companies which provide a wide range of services. And it’s not just the products and services a company might offer that brings the high-risk category - it's how they operate, relationships with their customers and their legal obligations. It can be a minefield to understand and negotiate. 

What makes matters worse is that the high risk banking sector is a complicated and fluid environment, in which regulatory, technological and economic factors all play their parts. 

So it’s best to understand the current trends and how you can adapt to them as a business. 

A good place to start is with an ever stricter regulatory environment. Regulatory authorities are increasingly on their guard against fraud, money laundering and the financial of terrorism. They have toughened up the rules for all those that offer payments systems for companies and their customers. The regulators, rightly, are enforcing financial services providers to really know their own customers and require them to operate at a higher level than before.

Increased due diligence, backed by comprehensive documentation and demonstrable compliance with anti-money laundering (AML) and know-your-customer (KYC) requirements, is the order of the day. 

So how do businesses cope with this increasing jumpy regulatory environment? 

You take rules seriously and ensure you are up to speed with all the latest requirements. And that means making an investment in robust AML and KYC compliance measures to ensure you are in-line with the latest requirements. This comes down to solid housekeeping, including maintaining thorough and accurate records, conducting regular audits showing an appreciation and empathy for the changing regulations.

The second trend to consider, and one of the most welcoming trends, is the rise of the fintechs. It's these companies which have disrupted the traditional financial services industry and now offer a whole range of tools and strategies by which you can boost your AML and KYC procedures. They are often specialist providers, offering innovative solutions, everything from peer-to-peer lending, blockchain and digital wallets.

The third trend is technology and this plays a huge role. Big data and AI are playing increasingly key roles when it comes to risk assessment. Data analytics and machine learning, which can identify patterns and trends within their operations to mitigate risk, is increasingly appealing to banks and other institutions. 

Businesses have to leverage technology to improve risk management and operational efficiency. By implementing their own robust cybersecurity measures, companies can and use data analytics to monitor and mitigate risks.

The fourth trend is the growth of cryptocurrencies and decentralised finance (DeFi) which has created new avenues for high-risk businesses to access financial services. 

While this space is still evolving and carries its own risks, some businesses are finding success by using cryptocurrencies for transactions and capital raising. However, they must be aware of regulatory developments in this rapidly changing sector.Companies need to consider exploring fintech solutions and cryptocurrency options. These can provide alternative avenues for banking and financial transactions. 

There is a lot of emphasis on the user of financial services to ensure that they comply with the regulatory requirements, but the bigger responsibility lies with the provider of the services - it is their role to see that the rules are followed and the payments system is robust and transparent.

This is what lies behind the Paynovate mantra of High Risk as Low Risk. The Paynovate approach to risk profiles is highly detailed and systematic. The strategy is to eliminate businesses and industries that do not fit with its reasonable approach to risk management.

And perhaps more importantly, to ensure that this continues throughout the lifetime of our customers, from onboarding to ongoing transaction monitoring.A Paynovate customer understands that strict measures will always be in place when they are using the Paynovate platform. 

By embracing new technologies, diversifying banking relationships and staying compliant with evolving regulations, high-risk businesses can navigate the evolving landscape and secure the financial services they need. Staying informed and seeking expert advice are crucial steps in this ever-changing sector. 

The objective has to be to enable high-risk businesses to adapt to the challenges and opportunities presented by the current trends in high-risk banking.

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