Wrestling Payments

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EPISODE SUMMARY
This episode of Wrestling Payments tackles the critical topic of exposure limits in modern payments. Host Joe Casali and guest Sean Carter, President & CEO of Neach Payments Group, dissect an article by Jordan Bennett of Nacha, which focuses on payment modernization and digital transformation. Sean highlights a common misconception: viewing exposure limits solely through the lens of credit risk. He argues for a broader perspective, emphasizing operational risks like account takeovers and business email compromise.

Sean explains how current exposure limit practices often focus on the unlikely event of a business's complete failure, rather than the more frequent occurrences of chargebacks and return items. He advocates for a more holistic review process, considering IT security practices and overall risk management. Sean also discusses the challenges financial institutions face with third-party senders and the importance of consistent due diligence.

Finally, Sean challenges the common practice of assigning uniform exposure limits. He urges listeners to consider the unique risks of each originator and leverage available tools for efficient limit monitoring and enforcement. This episode provides valuable insights for financial institutions looking to strengthen their payment processes and mitigate risk.

Sean Carter
President & CEO
Neach Payments Group and NEACH
Payments risk expert advocating for holistic exposure limit reviews.
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KEY INSIGHTS
Rethinking Exposure Limits

Exposure limits are often mistakenly viewed solely through the lens of credit risk. This narrow focus overlooks the significant operational risks prevalent in today's digital payment landscape, such as account takeovers and business email compromise. A more comprehensive approach considers a company's IT security practices, overall risk management, and the potential for fraud, ensuring a more robust and effective risk mitigation strategy. Shifting the focus from the unlikely scenario of complete business failure to the more frequent occurrences of chargebacks and returns offers a more practical and relevant assessment of risk.

Third-Party Sender Oversight

Financial institutions must extend their rigorous risk management practices to third-party senders. While institutions may have robust internal controls, neglecting the oversight of third-party partners creates a vulnerability. Ensuring these partners adhere to the same level of due diligence and risk assessment is crucial for maintaining a strong security posture and protecting the institution from potential fraud and operational failures. This includes implementing agreements and monitoring processes to guarantee consistent security practices across the payment ecosystem.

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Episode Summary
In this episode of Wrestling Payments, host Joe Casali welcomes Nanci McKenzie and James Rowe from Affirmative Technology. They dive into the challenges of creating a risk rating for originators in the payments industry.

The conversation highlights the importance of risk management in financial institutions. Nanci and James discuss the need for automated solutions to handle the increasing volume of transactions. They emphasize that manual methods and spreadsheets are no longer sufficient. The discussion also touches on the role of regulators and the pressure they put on institutions to have robust risk management systems in place.

The episode concludes with a look at the broader economic landscape. James, an economist, shares his insights on the potential impact of rising interest rates and the debt ceiling issue on financial institutions. He also offers his perspective on the current state of the economy and its implications for banks. This episode is a must-listen for anyone interested in the intersection of risk management and the payments industry.
Podcast Experts
Name: Nanci McKenzie and James Rowe

What they do: Executive Vice President of Compliance and Product Strategy and Chairman of the Affirmative Technology Board

Company: Affirmative Technologies

Noteworthy: An industry veteran, Nanci McKenzie is known for her expertise in risk management and compliance in the payments industry. / An economist by training, Rowe specializes in leveraging data analytics to solve key business problems in the financial sector.

Where to find them: Nanci: LinkedIn|James: LinkedIn
Key Insights

Automated Risk Rating for Originators

Wrestling Payments delves into the need for automated risk rating for originators in the payments industry. Nanci and James discuss how their tool, Navigator, can provide accurate ratings for originators based on their transaction history. This system allows financial institutions to prioritize their focus on high-risk originators, enabling efficient risk management. The tool also allows for monitoring originators' risk transition, providing valuable insights into their business activities.

Embracing Data Analytics
James, an economist by training, emphasizes the importance of embracing data analytics in financial institutions. He demystifies terms like AI, machine learning, and big data, explaining that these are simply automated statistical techniques that have been around for decades. James encourages financial institutions not to be intimidated by these terms but to leverage them to make effective decisions.

Regulatory Pressure and Risk Management
The podcast also highlights the increasing regulatory pressure on financial institutions to have robust risk management systems. Nanci points out that regulators are asking institutions how they are risk grading their customers and are taking enforcement actions based on their findings. This underscores the importance of efficient risk management systems, such as the one provided by Affirmative Technologies.

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Episode Summary

In this insightful episode of Wrestling Payments, Joe Casali dives deep into the complexities and challenges of payment operations. He emphasizes the critical role of problem-solving in the industry, highlighting how essential it is for professionals to understand the rules and mechanisms of different payment systems. Joe narrates a real-life story, maintaining anonymity, to illustrate the intricate process of payments, particularly focusing on the Real-Time Payments (RTP) system.

Joe begins by explaining the fundamental flow of an RTP transaction, involving the sender, sending bank, network, receiving bank, and receiver. He details the rapid and efficient process, emphasizing the speed and precision of these transactions. The episode takes an interesting turn as Joe introduces a third-party service provider in a transaction scenario, exploring how their involvement can complicate the payment process.

The heart of the episode lies in a case study where a transaction goes awry due to a mismatch between the receiving bank's system and the RTP network. Joe explains how a seemingly straightforward RTP transaction gets complicated by additional checks and balances introduced by the receiving bank. This leads to an insightful discussion on the importance of understanding payment network rules and the pitfalls of automated systems in handling exceptions.

Key Insights

The Importance of Problem-Solving in Payment Operations

In the rapidly evolving world of payments, problem-solving emerges as a crucial skill. Joe Casali discusses the changing landscape of payment operations, emphasizing the need for professionals who can navigate complex scenarios. He points out that understanding the rules and mechanics of payment systems, such as Real-Time Payments (RTP), is vital. This insight highlights how problem-solving goes beyond technical knowledge, requiring an adaptable mindset to address unforeseen challenges in payment transactions.

Navigating Complexities in Real-Time Payments (RTP)

The episode dives into the intricacies of the RTP system, illustrating its operational flow involving senders, banks, and receivers. Joe Casali explicates the speed and efficiency of RTP transactions, but also sheds light on potential complications. A key insight is the complexity introduced by third-party service providers in the payment process. This discussion underscores the necessity for thorough understanding and coordination among all parties involved in RTP transactions, highlighting how a single mismatch can lead to significant operational challenges.

Handling Exceptions and Automated Systems in Payment Networks

A compelling segment of the podcast revolves around a case study where an RTP transaction is disrupted by additional security measures. The episode reveals how automated systems, while efficient, can falter in handling exceptions, especially when they don't align with the payment network's protocols. This insight stresses the importance of balancing automation with human oversight. It serves as a cautionary tale about the pitfalls of over-relying on technology in payment systems, advocating for a more nuanced approach that considers the unique aspects of each transaction.

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Episode Summary

In the latest episode of Wrestling Payments, host Joe Casali and guests Dennis Walker and Stephen Dillon engage in a candid conversation about the complex world of third-party sender relationships in the realm of banking and ACH payments. Drawing from their extensive experience in the industry, Dennis and Stephen share valuable insights and practical wisdom that can help financial institutions navigate this intricate landscape effectively.

The discussion kicks off with an exploration of the key factors that define third-party sender relationships. Dennis and Stephen highlight that understanding and educating the entire workforce within a financial institution is paramount. They stress the importance of being proactive in risk management, recognizing red flags, and implementing preventive measures to maintain the integrity of ACH transactions.

Throughout the conversation, they emphasize the significance of regular annual reviews and check-ins with customers, especially the larger ones. These reviews serve as a crucial opportunity to assess any material changes in a customer's business, their sophistication level, and their evolving risk profile. By staying engaged and informed, financial institutions can adapt their risk management strategies to meet the evolving needs of their customers effectively.

Guest-at-a-Glance
Names:
Stephen Dillon, APRP, AAP, CTP , Eastern Bank
Dennis Walker, CIA, CISA, CRCM, CFSA, CRMA

Noteworthy: Stephen Dillon boasts a career in banking and treasury services, with a keen understanding of the intricacies of ACH payments and risk management. / Dennis Walker possesses a diverse background in banking and financial services, bringing extensive experience and knowledge to the discussion on third-party sender relationships.

Key Insights

Proactive Approaches to Spotting Third-Party Senders in Banking

Dennis and Stephen discuss strategies for identifying third-party senders in the banking industry. They highlight the importance of keyword analysis, company name checks, and reviewing client portfolios to spot potential third-party senders. Additionally, they stress the need to leverage annual reviews and customer engagement to stay vigilant in risk management.

Balancing Risk Mitigation and Customer Engagement with Third-Party Senders

Dennis, Stephen, and Joe underscore the significance of robust risk management practices and consistent customer engagement in dealing with third-party senders. They emphasize conducting risk assessments, due diligence, and maintaining open communication with clients. These practices help banks and financial institutions safeguard their interests and build trust with customers.

Deciphering the Gray Areas: Classifying Third-Party Senders in Banking

Stephen and Joe explore the complexity of classifying entities as third-party senders in the banking sector. They dive into scenarios where the distinction may not be straightforward, particularly in cases involving common ownership or management. The discussion highlights the need for institutions to make informed decisions and apply due diligence when determining third-party sender status.

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Episode Summary

In this episode of Wrestling Payments, Joe Casali sits down with Charlie Kelly from Remedy Consulting. They dive into the evolving landscape of payment systems. Charlie shares insights from his vast experience, focusing on core conversions, contract negotiations, and the challenges community banks and credit unions face.

Charlie emphasizes the importance of navigating the complexities of payment system upgrades. He highlights how Remedy Consulting aids institutions in understanding their core provider's language and the broader ecosystem. This support is crucial for making informed decisions during core negotiations or considering conversions.

The conversation also explores the intricacies of connecting traditional banking systems with emerging fintech solutions. Charlie discusses the hurdles in integrating new technologies with established banking infrastructures. He stresses the balance between innovation and maintaining security and reliability in payment systems. This episode offers a glimpse into the critical role of consultancy in simplifying and guiding financial institutions through technological transitions.

Guest-at-a-Glance
Charlie Kelly
Partner at Remedy Consulting and Host of BankTalk Podcast
Remedy Consulting
Charlie Kelly brings a wealth of experience from his tenure at one of the nation's leading core providers, focusing on project management, pricing, and contracts. Now at Remedy Consulting, he specializes in helping community banks and credit unions navigate complex payment system conversions and negotiations.
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Key Insights
Navigating the Maze of Payment System Upgrades

Charlie Kelly discusses the intricate process involved in payment system conversions, emphasizing the common pitfalls financial institutions encounter. A significant challenge highlighted is the misalignment between digital providers and core systems, which often lack seamless integration. This disconnection can lead to costly mistakes, such as the cancellation of nearly finalized contracts due to unrecognized incompatibilities. Kelly’s expertise shines as he guides institutions through these complex negotiations, ensuring they make informed decisions that align with their technological and financial goals.

Modernizing Financial Systems: A Delicate Balance

The episode dives into the difficulties of integrating cutting-edge fintech solutions with legacy banking systems. Charlie Kelly points out the vast gap between the innovative ideas emerging from fintech startups and the reality of incorporating these into the established infrastructure of traditional banks. The biggest hurdles are the entrenched systems of larger providers, which are not easily adaptable or open to prioritizing new fintech integrations. This insight underscores the crucial role of consulting services like Remedy Consulting in facilitating this integration, ensuring that banks can innovate while maintaining the reliability and security of their payment systems.

The Crucial Link: Consultancies in Payment Innovations

Charlie highlights the essential role of consultancies in assisting community banks and credit unions with navigating the complexities of payment system upgrades and core conversions. By acting as an intermediary between these institutions and their core providers, Remedy Consulting plays a pivotal role in deciphering the jargon and technicalities of contracts. This service is invaluable for smaller institutions that might otherwise struggle to understand the full scope of their technologi