Consumer & Commercial Payments
August 29, 2024
I have been in the payments industry for 20 years, the last five of which have been as the CEO of Lerex. I have a deep technical background and find myself in an entrepreneurial role, safeguarding my clients from risk while providing efficient systems that enable them to get on with their businesses as smoothly and profitably. In my role, I come across the prevailing attitudes and receive wisdom in daily payments, and one such attitude is how our industry deals with ‘trust’. In this article, I argue that the payments industry must shift from a trust-based approach to a protection-based model to navigate the complexities of compliance and technology.
Of course, all relationships are built on trust, and without trust, we would not advance beyond the first step, which is to sign contracts for supply and purchase. However, in the payments industry, what is a noble sentiment can become the albatross around our collective necks because trust is expected to deliver effective technology and compliance with rules. Still, trust is the first obstacle in payments when it is misplaced. Too often, those we trust lack a complete understanding of the risks, compliance requirements, and technologies essential for practical systems.
There is a risk divide between compliance and technology that many don’t sufficiently pay attention to. This issue will become more severe as we rush towards the streaming mentality, which gains momentum daily. Just as music, video, film even work (through the gig economy), and transportation (say through Uber) gains hold, I see a future in which payments must keep up to serve their markets. To satisfy production and consumption, we are en route to a system in which payments, like production and consumption, will be performed as fractals of quantum figures that digitally expand on demand. Payments must keep up as the crucial link between supply and demand. The on-demand economy of the future will apply stresses and expose the risks at the intersection of compliance and technology. In my experience, I have often noticed that technology does not understand compliance and its fundamental requirements in everyday use. At the same time, those imposing compliance don’t fully understand the issues raised by the technology applied or the assumptions folks in compliance make about the technology.
Running a company like Lerex forces me to consider this array of issues to find solutions. This is why I say that techs should not, as such, be putting faith or having trust in their customers. As industry leaders, we must ask ourselves: Are we doing enough to protect our customers from the risks they don’t see? It’s time to adopt a more proactive approach. The role of techs isn’t to trust customers but to protect them against all risks from human to technological failings. It’s not that we don’t trust our customers as such; it’s more that success on our customer’s behalf requires that things are done efficiently and promptly to protect the customer, us as suppliers, and the ocean of the ecosphere in which we all swim. A trust-agnostic mindset best serves this system.
The difficulties experienced by some financial services businesses a year ago stem partly from our inability as an industry to grasp the nettle of trust and replace it with what I call the protection model. This deals with compliance, regulation, and technology with diligence, vigilance, and risk avoidance. The downside of the protection model is the possibility of being overly intrusive, but this does not need to be so. The plus side of the protection model is that when two-stage authentication protocols are in place, for example, we, the technologists, also build protections against rogue actors within the payments stream who could seek to abuse the system. The clients’ blind trust in the technology must be mitigated by our protective mindset when applying both the technology and the processes we design.
People understand the issues I write about above but do not engage directly enough with them in speech or public acknowledgement. As we race towards an on-demand world, including for payments, it’s for technologists like my firm, Lerex, to create the paradigms and mindsets that protect the payments ecosystem. The payments industry has evolved rapidly, but we are now entering a new era when seamless collaboration between business, compliance, regulation, and technology is critical. By embracing a protection-first mindset, we can ensure our systems are resilient against future challenges. The future of payments will be defined not by trust alone but by dynamic protection, providing security and success in a complex digital world.
Read more about Lerex Technology
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