Compliance in Europe is costlier than ever as financial crime relating to digital payments has increased by more than 20% in the last year. 

A new report from Forrester estimates that the annual cost of financial crime compliance in Europe is now €73bn (81.1bn USD), driven up by a combination of complex regulatory requirements and the costs of financial crime. 

It’s therefore not surprising that 81% of European businesses say their key focus for the next year is cutting compliance costs to increase profitability. 80% said on top of this, improving the effectiveness and efficiency of compliance controls would be another key focus. 

At the same time, on top of the initial loss, businesses’ bottom lines are further hit as customers expect payments to be processed in near real time, which current compliance models are preventing. This means unsatisfied customers who may look to other online merchants. 

Some of the top challenges for online merchants include customer risk profiling, KYC for account onboarding, ongoing monitoring & regulator reporting. 

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Key cost drivers

1. Labour: Due-diligence teams create the largest cost with over 70% of businesses reporting increases in labour-related expenses. 
2. Technology: As regulatory demands & financial crime evolve, so does the need for more sophisticated technology. Approximately 67% of European firms have experienced rising costs associated with KYC and AML technology. 
3. Fines and Penalties: Non-compliance is costly. Penalties for violations of AML directives or other due diligence measures can range from thousands to millions of euros per incident.

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What can online merchants do?

To mitigate these rising costs, while keeping fully compliant online merchants should consider the following strategies:

• Automate KYC processes: One of the biggest compliance burdens for online merchants is customer risk profiling and KYC for account onboarding. By automating these processes, such as using multiple card verification, merchants can ensure compliance while reducing manual errors and labour costs.

• Enable instant payments via automated Income Verification: Current compliance models often delay payments, leading to unsatisfied customers. Automating income verification allows merchants to process payments faster, improving customer satisfaction without compromising compliance.

• Streamline Payouts with fully compliant Card Pay-ins and Account Payouts: Payout delays due to compliance checks can frustrate customers and impact retention. By using compliant card pay-ins for deposits and direct account payouts, merchants can offer faster, more reliable transaction processes that meet regulatory standards while cutting costs

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At Semla, we offer all three solutions and more, helping compliance and payments teams streamline processes, reduce costs, enhance compliance an improve customer satisfaction.