Polar Moment's Payments Perspective: September 2024

Welcome to the September edition of Polar Moment’s Payments Perspective. This month, we explore significant changes impacting the payments industry. We’ll cover new security standards for payment systems, the rise of Buy Now, Pay Later (BNPL) regulations, and the latest developments in the European Payments Initiative (EPI).

New Security Standards for Payment Systems: ISO 20022 Updates

September brings the latest updates to ISO 20022, the global standard for electronic data interchange in financial services. With the increasing complexity of cross-border payments and the growing need for real-time transactions, these updates are designed to enhance security, standardise messaging, and improve compatibility between payment systems globally.

ISO 20022 facilitates clearer, more structured data in payment messages, which not only improves transparency but also bolsters fraud detection and prevention measures. This is particularly important for financial institutions and payment processors who are handling growing volumes of data across borders.

What businesses need to know:

Better data quality: Enhanced payment information will provide more detailed remittance data, enabling better reconciliation and payment tracking.
Strengthened security: Updates focus on fraud detection and cybersecurity, ensuring businesses can better protect themselves and their customers.
Global compliance: The updates will require businesses to upgrade their systems to be compatible with the new standard. Financial institutions and payment processors should begin preparing for full compliance.

These changes could lead to more efficient payment processing, but businesses must ensure they are ready for the transition.

For more information, visit ISO 20022 Handbook.

The Rise of BNPL Regulation

The explosive growth of Buy Now, Pay Later services has led to increased regulatory scrutiny, particularly in the EU and the UK. Regulators are stepping in to ensure consumer protection, transparency, and responsible lending practices. New rules have been introduced, which are designed to prevent excessive borrowing and protect consumers from hidden fees or charges.

The BNPL market, once largely unregulated, is now facing tighter oversight, with key changes including:

Credit checks: Providers must now conduct mandatory credit checks to ensure borrowers can afford their repayments.
Interest and fees disclosure: Stricter requirements for transparency on interest rates, late fees, and repayment terms.
Consumer protection: Providers are being held to higher standards of customer care, ensuring that BNPL users are fully aware of the risks involved.

Impact on merchants:

Retailers offering BNPL services must ensure their partners are compliant with the new regulations.
Consumers may take a more cautious approach to BNPL, potentially impacting spending habits, so merchants may need to adapt their payment offerings.

This regulatory shift is intended to create a safer environment for consumers while fostering sustainable growth in the BNPL market. For more details, visit BNPL Regulation News.

European Payments Initiative New Developments

EPI continues to gather momentum as it seeks to build a unified payment solution across Europe. In September 2024, several major European financial institutions joined the EPI, accelerating its development. The EPI aims to reduce Europe’s reliance on global payment networks like Visa and Mastercard by offering an alternative payment solutions for card payments, digital wallets, and real-time payments.

Key benefits of the EPI:

Cost efficiency: By creating a homegrown European alternative, businesses could benefit from lower transaction fees.
Security and sovereignty: The EPI is designed to enhance payment security and protect European payment data from global actors, strengthening digital sovereignty in the EU.
Seamless integration: EPI aims to provide smoother integration for European businesses operating across borders within the region, offering a unified experience for consumers and merchants alike.

As EPI continues to gain traction, businesses operating within the Eurozone should monitor its development closely, as it could reshape the European payments landscape in the coming years. For more updates on EPI, visit EPI News.

For more detailed discussions and personalised advice, get in touch to speak with a member of the Polar Moment team.

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