Aristotle wrote that ethics is the habituation of right action.Essentially, we don’t know what’s right out of the starting gate. The virtue of ethical behavior is one that we acquire through example and guidelines. We become ethical, or as Aristotle would have it, virtuous, through practice. The more we practice right action, the more innate it seems to become. It’s not an inherent knowledge, it’s a learned trait. This discussion from Aristotle’s classic work Nicomachean Ethics is a great description of the important interrelatedness of compliance and ethics, particularly in the Payments industry.
The payments industry is highly complex and highly regulated. It’s unlikely that a person new to the industry would walk in and be able to identify right from wrong, speaking in regulatory sense. The lattice of regulation created by the card brand rules, state and local laws, as well as federal regulation, and potentially international laws, can cause confusion even among well-entrenched payments professionals. If you were to overlay that with the development of new business models, such as payment facilitators and marketplaces, the landscape quickly becomes treacherous. This is where a robust Compliance and Ethics program comes into play.
As Aristotle says, a good government will attempt to legislate virtuous behavior to help its citizens learn to act “virtuously.” Eventually, its citizens learn to extrapolate that virtuous behavior beyond those circumstances contemplated by law, and simply behave in a “right” manner. Leaving behind for the moment arguments about legislating morality, let’s focus on the notion that laws act as a guideline for behavior in the absence of an inherent understanding. The compliance program acts as that guideline for the uninitiated. Without long experience or an inherent understanding of the potential pitfalls of non-compliance in the payments space, the compliance program acts as the framework for what’s right and wrong, in a regulatory context.
Virtue, or to use the word that is more familiar to us, ethics is, according to Aristotle, what makes something perform well. So it follow suit then, that an ethical company would perform well. It’s in the best interest of the company, then, to ensure that its team members are inclined to act in a way that is ethical. That means enabling merchant, service providers, and partners to conduct their business in a way that complies card brand rules. That also means recognizing that simply because we can do something, it doesn’t mean we should. We’ve seen this play out in the rise of Fintech.
Fintech is an exciting wave of innovation that has been transforming the payments space over the course of the last ten years. Agile, creative companies have been developing new ways for merchants to engage with their customers. Things that we already take for granted, such depositing paper checks from our phones, or paying our friends back for lunch through text messages, are just some of the examples of the innovations borne of the Fintech revolution. But there were some downsides to that rush to the payments space, too. While the vast majority of new Fintech players took the time to learn the payments space, to understand the regulatory environment, and to play according to those rules, there were a few players that saw an opportunity to cash in on the changing industry. Software developers without an understanding of the complexities of the space made decisions, which in retrospect, were not founded on a complete understanding of the risk involved, or of the impact it might have on the end user. With a robust and mature compliance program in place, it’s possible that those companies may have avoided those missteps.