Numerous UK financial organisations are seeking alternative arrangements following the US government’s decision to ban payments processor PacNet Services Ltd and freeze its owners’ assets.
The US applied the ban in late September after an investigation found that for 20 years, PacNet was processing payments on behalf of a range of mail fraud schemes.
According to a government statement: “PacNet has processed payments for the perpetrators of more than 100 different mail fraud campaigns, collectively involving tens of millions of dollars. In doing so, PacNet provides fraudsters in other countries with unfettered access to US banks.”
In a statement on its website, PacNet “categorically rejected” the allegations made against it, and added that it had taken the step of ceasing payments processing for direct mail companies in the interest of safeguarding the public.
In order to operate and comply with the FCA’s expectations that end users not be affected by the situation, financial services organisations – particularly online lenders – are scrambling to find alternative processors for their platforms.
A source close to the matter has said that PacNet clients have needed to move quickly, but have found the new breed of fintech e-money financial institutions able to respond to clients’ needs.
The source added these fintechs have been able to rapidly accommodate PacNet’s former client base, owing to the recent innovations that they have brought to the market. This has allowed them to flexibly provision alternative services, combined with substitute payments processing relationships.
“The online lenders themselves are relieved to have found some viable alternatives – we didn’t think it would be possible, but it seems the world of payment processing is evolving quickly, with decent providers emerging to help us manage the complex distribution and reconciliation of loans and payments,” the source said.