Executive Summary and Main Points
The payments industry is entering a “decoupled era” where customer convenience, affordability, and security distinguish market leaders. The risk function emerges as both a protective mechanism and a growth lever. Key differentiators in risk management include enhancing risk processes for regulatory compliance, fighting fraud while elevating customer experience, building operational resilience, and improving credit and collections. Additionally, growth opportunities lie in entering new markets, viewing risk as a merchant-serving product, and improving service operations through advanced technologies.
Potential Impact in the Education Sector
The developments in the payments industry could significantly influence Further Education, Higher Education, and Micro-credential spaces. Educational institutions could adapt similar risk management frameworks to safeguard against data breaches and enhance student financial transactions. Strategic partnerships between education providers and payment technology firms could offer students more secure and seamless financial experiences. The digital transformation in payments suggests a parallel shift for education institutions to prioritize data security and operational resilience.
Potential Applicability in the Education Sector
Innovative applications of AI and digital tools portend a transformative effect on global education systems. AI-enhanced fraud detection systems can protect institutions and students from financial fraud. Digital operational resilience frameworks could prevent IT failures that disrupt learning. Additionally, by applying advanced credit models and analytics, educational institutions can better manage student loans and funding. Such applications align with the increasing demand for secure and efficient digital learning platforms.
Criticism and Potential Shortfalls
While innovations in the payments industry promise enhanced security and operations, they may falter if improperly executed. Case studies show that heavy investments in risk management can strain resources and divert focus. In the education sector, this could manifest as excessive caution that hinders financial assistance to students or technology access. Additionally, ethical considerations around student data privacy and the digital divide must be addressed to ensure equitable access to educational technology.
Actionable Recommendations
For education leaders looking to harness these technologies, it is crucial to first establish strong data governance and risk management frameworks. Partnering with technology providers that align with institutional values and compliance requirements will be key. Educational entities should pilot AI tools for monitoring financial and operational risks and embrace digitalization by offering robust, secure online platforms for payments and learning. Training staff in cybersecurity and maintaining a culture of resilience will support long-term sustainability.
Source article: https://www.mckinsey.com/capabilities/risk-and-resilience/our-insights/the-future-of-the-payments-industry-how-managing-risk-can-drive-growth