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Managing risk in the payment systems There are two types of risk in financial transactions ? credit risk and liquidity risk. When one party does not receive the outstanding amount in the transaction process, this is credit risk; and the liquidity risk is when one party owes an amount but is unable to pay on time.

Payment risk refers to the potential of losses due to a contract default or other payment event such as fraud, security breaches or chargebacks. Companies regularly handling a high volume of online payments are subject to such risks.

The Red Book Statistics is a publication on Payment System referring to the Committee on Payments and Market Infrastructures (CPMI) of the Bank for International Settlements (BIS).

Credit risk is the risk that participants in the transaction will not be paid for an outstanding claim. These participants include the counterparties themselves, the issuer of the settlement medium, and, if any, intermediaries involved in the delivery of goods, services, etc.

Payments data can provide businesses with valuable details about their customers, including yet not limited to their demographics, purchasing behavior, and spending patterns. This information can be used to create targeted marketing campaigns, boost the shopping experience, and increase customer loyalty.

In the most basic sense, interoperability between payment systems involves the capability for one or more elements of the payment system mentioned above to communicate with each other. Payment systems underly all financial trans- actions?this would not be possible without some degree of industry standardization.

PSPs and partners can offer convenience, flexibility, and cost-efficiency, but they can also expose you to security breaches, fraud, compliance issues, and reputational damage.