Given that a large number of compliance requirements from payment networks, such as Visa and Mastercard, impact the payment processing rail, many assume that payment network compliance can be outsourced to payment processors, especially since most changes are likely to affect the payment processing systems.
But that’s a risky shortcut. This increases the risk that the license holder (issuer or acquirer) may miss compliance updates or requirements, which can result in significant financial or operational issues.
Why outsourcing payment network compliance is not a good idea
Sometimes, card issuers or acquirers completely rely on their processor to manage compliance with Visa and Mastercard because they assume:
- Most of the topics are technical and only impact the processing domain, and so, they trust their processor to be compliant in a timely manner
- Processors or sometimes payment networks will directly inform them about important non-technical updates
As a result, they do not see the need to have in-house experts managing payment network compliance. But, from the payment networks’ perspective, issuers and acquirers remain fully accountable for any non-compliance or oversight. And it goes beyond technical updates: the communications from payment networks also cover critical non-technical information, such as fee changes, interchange updates, and product modifications, that typically concern only the licensees and not the processors.
Relying solely on a processor for timely access to such updates can increase the risk of missing key information, which could potentially lead to financial and operational consequences for the bank.
The risks of delegating network compliance solely to processors
While processors are responsible for parts of the compliance updates when impacting the processing side, they are not liable to the payment networks when it comes to non-compliance. The principal license holder remains fully accountable to the payment networks.
During compliance audits, payment networks expect license holders to demonstrate both external and internal oversight. Even if certain payment services are outsourced, the bank, as the principal license holder, still needs to ensure that third-party service providers are compliant with the latest updates.
Without clear ownership, banks risk:
- Fines for non-compliance oversights
- Missing out on important fee-related updates that can have a financial impact
- Internal inefficiencies due to miscommunication or delay in sharing updates with the impacted teams
Payment networks are clear: you can outsource the work, but not the responsibility. Outsourcing an area of business, such as processing, does not shift accountability away from the principal member.
So the question, especially for smaller banks, is: how do you stay in control and keep an overview of compliance with networks without making it an operational burden?
The volume of updates and requirements from payment networks continues to grow, making it increasingly challenging to manage this critical operational process manually. Many banks are now investing in technology that simplifies workflows, reduces manual effort, and automates wherever possible. While some choose to build internal systems, others rely on specialised solutions to bring structure and automation to the process.
That’s why we built Kajo, a solution designed specifically to help banks of all sizes efficiently manage payment network updates, without losing visibility or risking compliance oversights. Our goal is to enable licenseholders of payment networks to stay ahead of updates and changes. You stay in control, avoid missed updates, and get everything you need in one place.
Do you want to learn more about Kajo? Join our monthly live demo and get answers to all your questions.