Fenergo study: Emerging risks in US fintech payments since FedNow’s launch
AML talent shortages, inadequate transaction monitoring & deteriorating CX among fintech concerns with FedNow's rapid evolution
DUBLIN, IRELAND (October 25, 2023) — Fenergo, the leading provider of digital solutions for Know Your Customer (KYC), Transaction Monitoring and Client Lifecycle Management (CLM), today released its study of emerging risks in the fintech payments sector since the launch of FedNow. Surveying high-level risk and compliance officers across fintech payment companies, including P2P payments platforms, mobile payment apps, digital/virtual asset service providers, and more, Fenergo’s analysis reveals that the swift pace of real-time payments, while beneficial, introduces significant challenges in fraud prevention, security protocols, and regulatory compliance.
“In the rapidly evolving landscape of financial technology, compliance and risk officers at fintech payment companies are navigating uncharted waters with the launch of FedNow,” said Stella Clarke, Chief Strategy and Marketing Officer at Fenergo. “Our research illuminates the significant hurdles in financial crime prevention and compliance efforts, painting a vivid picture of the challenges faced in this new era.”
The Impact on Customer Experience
According to Fenergo’s study, almost half (42%) of risk and compliance officers at fintech payments companies report that ensuring a smooth user experience during compliance operations in adopting FedNow is a challenge. That said, 69% expressed worries that neglecting FedNow adoption would negatively affect business operations, leading to an unsatisfactory customer experience.
Commenting on this, Clarke said: “These findings highlight genuine concerns about the repercussions of neglecting this transformative wave. Clearly, it’s a delicate dance, and those who can balance user satisfaction and operational efficiency will be the most successful.”
Staff Training, Talent, and Collaboration
Fenergo’s analysis spotlighted many concerns among risk and compliance officers in fintech payment companies. Inadequate staff training topped the list at 78%. “Notably, our study also found that 34% lack anti-financial crime talent. Inadequate training coupled with insufficient talent poses serious challenges,” emphasized Clarke.” Cumbersome manual KYC procedures followed closely at 67%, and limited collaboration with regulatory authorities ranked at 65%.
When questioned about the processes requiring immediate attention for FedNow adoption, 62% highlighted either insufficient real-time transaction monitoring or limited data encryption and security measures.
The Funding and Compliance Balancing Act
Despite the numerous obstacles faced by risk and compliance officers in fintech payment companies, all respondents reported challenges in securing sufficient funding for investing in new technology and enhancing compliance efforts. For 43%, the struggle lies in predicting future compliance needs amid regulatory shifts, while 30% say their company prioritizes sales-driven projects over compliance, risking regulatory fines and long-term reputation damage. The remaining 27% either grapple with limited stakeholder awareness or uncertainties around return on investment (ROI) and long-term benefits.
Methodology: Fenergo conducted a comprehensive survey involving 100 high-level risk and compliance officers from prominent fintech payment enterprises. This diverse pool of participants included professionals from various sectors such as P2P payments platforms, mobile payment apps, payment processing firms, alternative lenders, digital wallets, and digital/virtual asset service providers, all operating within the United States.
Fenergo is the leading provider of Client Lifecycle Management (CLM) solutions that digitally transform how financial institutions, asset management and fintech firms onboard and manage clients throughout their client lifecycle. Its software digitally orchestrates every client journey from initial Know your Customer (KYC) and client onboarding, automating regulatory compliance and enabling continuous monitoring throughout the client lifecycle (transaction monitoring, perpetual KYC), all the way to client offboarding. Fenergo is recognized for its in-depth financial services and regulatory expertise and out-of-the-box rules engine which ensures financial institutions are future-proofed against evolving Environmental, Social and Governance (ESG), KYC, Anti-Money-Laundering (AML), tax and prudential regulations across 120+ jurisdictions. Headquartered in Dublin, Ireland, Fenergo has offices in North America, the UK, Poland, Spain, South Africa, Asia Pacific, and the United Arab Emirates.
For further information about Fenergo, please visit: www.fenergo.com