Card scheme compliance is becoming harder than ever – here’s why!

Maintaining compliance is crucial to any financial institution’s ability to provide services – yet this must be balanced with investing in innovative capabilities that allow for service improvement, market expansion, and customer service improvement. 

This balancing act is particularly challenging in this part of the world: according to Lexis Nexis, the cost of remaining compliant is highest in the UK and Europe, on average three times greater than in North America and APAC and up to seven times higher than in LATAM. 

One aspect of compliance for financial institutions is card scheme compliance, which involves compliance with license rules (scheme rules and regulations) of international payment networks (e.g. Mastercard, Visa). Card scheme compliance includes several sides, such as reviewing the impacts of changing technical requirements on different systems, keeping an overview of new business rules, managing scheme fees and interchange rates, etc. These changing compliance rules are typically communicated weekly to licensees in a “bulletin” format. 

Yet the number of bulletins published by payment networks is becoming more frequent, complex, and hard to stay on top of – for example, Visa and Mastercard alone issued approximately 25 per cent more bulletins in the first six months of this year compared to the same period last year. 

This rising volume of rule changes and requirements has added to the workload of teams processing such publications at the banks. As this process is handled manually, the increase in workload can come at the expense of overlooking compliance requirements, missing deadlines or failing to keep an updated overview of the scheme compliance status. 

Scheme compliance entails a critical responsibility: to avoid non-compliance leading to interoperability issues, non-compliance assessments, and financial losses due to not optimal interchange or scheme fees. In dire cases – overlooking compliance requirements can cause fines and lead to a loss of the scheme licence for a bank.

Although compliance is a crucial process, today’s approach is often inefficient, time-consuming and essential requirements are easily overlooked. 

First, it is a largely manual process. Most scheme compliance managers spend most of their time communicating new rules and requirements to different departments via email and then chasing every individual to collect feedback on the compliance status.

This highly manual process means a high risk of missing some requirements, information or deadlines. In some cases, this might result in discovering unexpected surprises in scheme fees and in other cases, this can cause a compliance overlook resulting in hefty fines from the payment schemes.

The manual nature of the task also means that preparing a comprehensive compliance overview is a highly challenging task requiring constant updates and maintenance of the overview. 

Many smaller banks do not have a dedicated scheme compliance manager to take care of the process. Subsequently, it’s either being taken care of by roles such as product manager or project manager. The lack of expertise in such a domain increases the risk of non-compliance and related fines even more.

There is vast potential to improve this process in the digitalisation age and gain control over the scheme compliance with minimal efforts. Banks just need to take the necessary steps to take action – before it’s too late.