Risk, Risk, Ris…

Feb 21

In 1988, Beetlejuice debuted in malls across America. It featured a brilliant Michael Keaton as the ghost Beetlejuice. If you said Beetlejuice three times he would appear and a series of unintended consequences would soon follow.

So it sometimes seems with payments risk. Revenue seekers and ambitious fintech entrepreneurs worry if you say payments risk 3 times, a compliance officer will appear. The business opportunity will then face unintended consequences.

This “revenue versus risk” thinking does us all a disservice. Great innovators grow topline revenue and reduce their downside exposure. The best compliance teams know risk management protects the consumer and the business.

So why are we kind of bad a this? We need a modern way of talking about risk:

Let’s all stop flying blind - This really should be the first, second, and third bullet. Risk management defaults to no in the absence of information. Organized, timely data shifts it to proactive mitigation. Guess who else needs real-time data? Everyone. Including UX designers. Design your data for both revenue and optimized risk management.
Win because being better at risk management is just being better - Please call SoFi and ask them if their approach to credit risk management was a competitive advantage. Spoiler alert: yes. There is so much opportunity that comes from just being precise!
Sharing risk is good - Distributed technology-driven payments solutions terrify institutions and frustrate new entrants. It does not need to be this way. Fundamentally, the organization in the best position to manage risk is whoever is most knowledgeable of the customer at that point in time. Curious why there is an unusual sharp spike in sales? The construction logistics company knows this is because we just got a blizzard. Worried that a card is getting used in two places at once? The payments processor is in a position to stop this. This is a distributed risk model.

We are all missing a huge opportunity because we frame the problem as a versus one. If you are a start-up who thinks this whole payments risk thing is a “check the box,” then pause and take the time to understand why payments risk management helps your business and customers. If your a seasoned “second line” risk professional, who has seen every mistake, then pause to think about what problems could be solved with a partnership. Systemic risk mitigation will come from better technology and the immediacy of data that platforms can bring.

“Risk. Risk. Risk.” No Beetlejuice showed up! Risk management just one part of creating a competitive, unique, and better payment experience.

In advance of this blog, I talked to a few of my payments friends (see footnotes) and I’m trying to figure out why this topic sometimes connects and sometimes doesn’t. Comments welcome here or in the Linked-in post that probably got you here!

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