Financial Risk

Financial Risk exists when a user spends funds in their account without intending to repay them. Another Risk Vector is when a user takes advantage of the "float" (the time it takes for transactions to process and settle) to overspend. In the case of loan and credit products, this can occur by taking credit from you, but then defaulting on the repayment obligation. In the case of savings and deposit accounts, this can occur by funding their account via one of the payment transaction methods (commonly referred to as "rails") and spending the funds knowing that that original transaction will ultimately fail, thus overdrawing their balance and leaving the you with limited options to recoup funds.

Other than Provisional Credit and Credit Extensions, financial risk is primarily created by providing customers access to creating payment transactions. Since payments can return up to 60 days after a credit has been applied to a customer's account, payment processing exposes you to financial risk of capital loss.

To mitigate this Financial Risk, several methods can be utilized including:

• Velocity Limits - only allowing up to a set amount of funds to be withdrawn from an account or paid in a specific time period, such as per day.
• Funding Holds - holding deposited funds from external sources as pending for a set number of days based on the past behavior of the client or in accordance with industry norms (such as holding for 3 days)
• Account Locking - suspending all transactions from an account when suspicious behavior is detected.
• Client Locking - suspending a client user from all transacting on the platform when potential fraud is detected.
• Fraud Pattern Detection - detecting unusual behavior and halting a transaction or locking an account when it occurs.