Moving into a new year is always exciting, especially for innovative and fast-paced sectors like payments. But what does 2022 have in store for payments regulation? Over the last two years, the payments industry has grown quickly and significantly. Driven by the pandemic and an increased shift towards all things digital, payments have boomed. Looking ahead to the next months, we can expect some regulatory developments, particularly regarding security, cyber threats, and AML rules.
Regulatory oversight
Payments regulation has increased over the last few years, and it shows no sign of letting up. This year, we will see increased emphasis on protecting customer funds. Likewise, companies must be able to show customers are covered, should they go insolvent. Regulators will also be stepping up efforts to combat money laundering as it remains a significant risk for payment firms.
While more prominent firms will see an increase, some smaller ones may have fewer obligations. This was hinted when the UK announced changes to its AML regime, removing some operators from the scope of domestic laws. That said, those engaging in cryptocurrency payments can expect more scrutiny as the EU revisits its AML regime. The European Commission has also put forward a draft framework that foresees the establishment of a bloc-wide AML supervisory body. Under the possible rule, any payment company operating in the EU must have a local representative for all AML matters.
Cross-sectoral developments
The European Commission is currently reviewing a package of AI laws that could impact providers using the technology. While it won’t be finalised until the end of the year, it could have consequences for those in the industry. In terms of payments regulation, it touches on ethics, security and aims to be a “global model” for other nations worldwide. Also, in 2022, the UK’s special provisions regime will end, requiring UK licensing for any provider offering services locally.
Meanwhile, Fitch Ratings predict a general clampdown from the banking sector in 2022. Analysts said this is “reflecting a continued return to pre-pandemic norms.” They added that payments regulators would focus on cyber, climate, and the risk posed by crypto.
Crypto and digital currencies
The EU’s Crypto-Assets Regulation will continue its path through the long European legislative process this year. This package could bring much-needed payments regulation certainty and quorum among member states domestic legislation when agreed on and enforced. More steps will be taken in the UK towards bringing cryptocurrency assets under British law and regulatory scrutiny.
Following the European Central Bank’s issuance of a digital euro project last year, we could see developments regarding a crypto-based, digital euro. Likewise, other countries will continue moving towards their centralised digital currencies. This, in turn, will drive forward more members of the public who want to pay with crypto and digital currencies.
Cyber and security
Cyber security is a big issue in 2022. As more people transact online, the allure for criminals is providing too much to bear. A report issued by Experian at the end of 2021 forecast increases in cyber threats for this year. This increased risk will be particularly pertinent in the gambling industry as criminals seek to cash in on its popularity. The report singles out hacks, phishing, malware, and identity theft as particularly concerning.
In May last year, the US took a hands-on approach to cyber safety via executive order. This year, others will follow suit. A UK-based company also announced they would invite payment firms to participate in various security and stress tests to detect vulnerabilities. In terms of payments regulation, existing rules will tighten across all regions. Technologies such as biometrics, tokenization, 2FA, encryption, and blockchain will be used for securing payments.
Fast Offshore and payments regulation
Fast Offshore can help if you plan to launch an online business this year. Our team assists with company incorporation, licensing, compliance, and all ongoing maintenance. Additionally, we help with structuring and opening accounts if necessary. Lastly, we provide all our services with a transparency and professionalism guarantee. With more than 24 years in the business, Fast Offshore are the experts you need to help your company succeed. To find out more, please contact us today.
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