Nowhere has the business world changed more rapidly than in the realm of payments. B2Bs and B2Cs alike have seen enormous shifts in customer expectations over the past two decades, with the rise of electronic payments, payment gateways, and even cryptocurrencies.
Although these developments bode well for organizations and ensure a faster, more connected world, they also invite additional risks — especially for payment processes. Consumer losses due to instances of fraud in the United States rose 30% between 2021 and 2022, while account takeover fraud losses rose to $12 billion in the last quarter of 2022.
Financial risks are also on the rise for cross-border payments. Different countries often support different security protocols, and disparate security practices or slipshod access policies could cost your business hundreds if not thousands of dollars. Additionally, cross-border payment platforms lacking critical infrastructure could chip away at your bottom line via forex fees and hidden costs.
If your business wants to protect its assets and ensure a safer, less risky payment process, it needs to create an overarching management plan and partner with a heavily protected global payment process.
But how do you find the right platform for your needs? And what security features should a risk management payment platform supply?
This guide explores each of these questions in detail, starting with a foundational definition of payment risk management.
What is payment risk management?
Payment risk management is the practice of abating possible threats to the money you send or receive internally.
In a payment gateway, risk management refers to protecting your funds by building the best possible system via API.
In global supply chain management, risk management refers to mitigating financial hazards by ensuring every possible touchpoint maintains a certain level of security.
Your payment risk management strategy must consider all three levels of payment processing:
- The sender — The person or business entity involved with sending money, either through a digital platform or a physical medium such as a check.
- The platform — The specific medium of financial transfer, which may include paper checks, digital wallets, ACH transfers, and more.
- The recipient — The person or business entity that receives the digital value, including their processes for remittance and safe withdrawal.
Types of risks faced by modern payment processes
There are five major types of payment risks currently faced by modern businesses:
Sending or receiving money on the basis of credit inherently comes with financial risks. Unfortunately, external factors such as economic uncertainty, marketplace meltdowns, and country-wide recessions could significantly compound its effects.
You may experience credit risks when businesses have every intention of paying your company but are unable to do so due to lack of funds. Another serious credit risk stems from large insolvent accounts, which could damage your business by reducing a line of revenue and impacting the operational efficiency of your brand.
Data breaches and leaked information could put customers’ sensitive details into the hands of bad actors, reducing their perception of your brand and leading to a mass exodus of customers. Statistics say more than 83% of consumers will stop doing business with a company after a significant data event.
Reputational risks could last for months — if not years — and potentially put your company out of business. Failing to keep critical financial details private could lead to poor reviews, negative responses, and a dwindling customer base.
Millions of global businesses experience payment fraud every year, with 51% of global entities reporting some kind of fraud, corruption, or financial crime. Fraud in the payments process typically boils down to four types: bad sellers, bad cardholders, account takeovers, and insider threats.
Predatory businesses and professional fraudsters could scam your business out of millions of dollars. Furthermore, account takeovers or insider threats could blindside your business with unforeseen dangers and compliance loopholes.
Operational threats in payment risk management refer to the quality of the global platform you choose. Any amount of downtime, disaster mismanagement, or vendor loss could tie up your funds and create confusion for customers and business partners.
Not every operational threat is the direct fault of your payments platform, as weather events and natural disasters sometimes strike without warning. However, your platform of choice should have some sort of plan in place for responding to downtime and maintaining business continuity.
Payment processes in any capacity are subject to compliance and regulatory requirements. Cross-border payments may come with an additional layer of complexity, as many international countries have their own set of laws and expectations.
There are two types of regulatory risks to consider: network rules and government regulations. Network rules require strict adherence to best digital payment practices, including GARS, PCI, and CBMP. In contrast, government regulations depend on the country in which you live or want to send money to. A few of the most common payment regulations include AML, KYC, and GDPR for privacy.
Why containing risks in payment processes can be difficult
There is no way to completely eliminate the risks of sending or receiving commercial payments. Bad actors and malicious code have become a part of the operational schema, and completely removing them from your business environment is simply not possible.
Here are some of the reasons why:
- There is no way to prevent internal team members from sharing information or performing unethical actions. Unfortunately, 22% of all cybersecurity incidents — including critical data breaches — are caused by internal threats.
- A whopping 64% of B2B businesses still pay via paper check — even if the financial risks are high. Paper checks are considered one of the most vulnerable payment methods and caused $18 billion in commercial losses as of 2020.
- Although there are some set guidelines for risk management, the existence of non-uniform risk management practices could create unforeseen loopholes in your system. A full 69% of modern businesses do not have a comprehensive risk management plan for their existing processes.
- Today, nearly 90% of all potentially avoidable payments fraud still goes undetected. Missing real-time access to funds could expose your business to losses, while the lack of a comprehensive reporting dashboard could keep you in the dark regarding recent transactions.
The existence of fraud in global payments is both very real and very difficult to avoid. That said, it is possible to contain risk in your payment process to ensure the safest possible transfer of funds. By reducing loopholes and inefficiencies within your current network, you can protect your employees, recipients, and revenue from data breaches or fraud.
Let’s take a closer look at this below.
How to control and mitigate risk with the right payment systems
The best payment platforms view risk as an ever-pervasive threat — and go above and beyond to ensure your funds remain as safe as possible.
Here are some ways a modern global payment platform can mitigate risks and reinforce your security practices.
1. Easily standardize mass payouts
The submission of a mass payout can accompany many financial risks, as sending payments to dozens if not hundreds of accounts may invite tenfold more hazards to your payment process. Not only do you have to consider multiple security risks, but disbursements to international recipients may also require a host of additional considerations (such as forex).
A great global payments platform can help you mitigate many of these risks at once. The very best, like Runa, offer one-touch mass payout APIs so you can pay recipients in 18 currencies and 30+ countries. You can easily navigate a one-stop dashboard with everything you need to know, and then submit payouts to recipients without needing to integrate your platforms.
2. Quickly monitor transactions at a glance
Many security issues in the payment process go unnoticed until it’s too late. Poor access to metrics or confusing data may prevent your organization from making informed decisions or sidestepping risky payouts that put your business at risk.
Thankfully, modernized platforms like Runa have everything you need to keep an eye on business transactions. Our intuitive dashboard requires just 24 hours of onboarding time so everyone at your organization can be empowered to make good decisions. Feel free to filter through our rich, real-time data reporting software to make confident decisions about your next steps.
3. Confidently mitigate preventable risks
Approximately nine in 10 payment risks may be preventable for your organization, which is something modernized payment platforms can help to ensure. However, this is not the case for all payment platforms — a whopping 59% of companies have experienced a cyberattack due to inefficiencies on the part of a third-party service provider.
It’s critical to choose a global payments platform you can trust, such as Runa’s customizable solutions. Our infrastructure comes with fraud protection and regulatory compliance to ensure your organization remains abreast of all best practices. Our intelligently designed software adheres to modern security expectations, which lets internal and external stakeholders rest easy knowing they’re protected.
4. Instantly access bank-level security
Contrary to popular belief, not every payment platform offers bank-level security. This small inefficiency may contribute to some major impacts, especially while sending or receiving digital value.
Bank-level security is a standard inclusion on the Runa payment platform. This extra level of encryption provides additional protection for your funds and ensures businesses remain safe while they scale. By ensuring your key financial data has additional layers of encryption, you can rest assured your risk management strategy can withstand the test of time.
5. Seamlessly enable your own security with API
Cookie-cutter payment platforms may not provide an adequate amount of protection for your business’s current or future needs. You may need a way to integrate systems with your existing tools, or build a bespoke solution for the clients, customers, or organizations you serve every day.
You can rely on Runa to build an effective API with white-label solutions for customer-facing payment processes. In addition to comprehensive documentation and developer support, we also provide solution consultants and a KYB evaluation.
Runa is the most effective solution for payments in a risk management platform
Minimizing fraud and reducing operational risk is a shared responsibility between your payment platform, executives, and on-the-ground team members. However, it’s critical to choose the right payment provider to reinforce the initiatives spearheaded by your financial team.
It’s not always easy to choose the right payment platform for your brand. Only one in 10 business owners feel satisfied with their current solution, and 54% of them want to select a new system that could improve their operational efficiency.
Thankfully, the choice is clear — switching to a secure payments platform like Runa is the best way to hedge your financial systems from risk.
Runa is an online payments platform offering digital value infrastructure. We offer customizable payment processes with heavily documented APIs so you can build a payment system specifically for your brand. Tap into our bank-level security to encrypt incoming or outgoing payments, then shorten your payment process to reduce inefficiencies and streamline the transfer of funds.
With Runa, you can protect your most valuable internal resources by:
- Paying less — With no setup fees or hidden costs, you only pay for what you use.
- Managing more — Access advanced security, fraud, and risk management tools to keep a watchful eye over incoming or outgoing value.
- Controlling more — Easily approve where and how digital values are sold so you can rest easy knowing you have full control of your brand.
- Supervising more — Log into your all-in-one management dashboard to guarantee payouts land when and where they’re supposed to.
- Automating more — Put routine payment tasks on autopilot to free up your team for more complex or sensitive tasks.
Best of all, getting started with Runa is 100% free.
Sign up today in five minutes or less to see our platform in action. Want to know what you can expect first? Our team would be happy to walk you through a comprehensive demo and show off our security features firsthand.