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5/2/13 - A Data-Based Taxonomy for Payment Instruments

A payment transaction is commonly characterized by the goods or services purchased and the value assigned to them, but what might be the most important element to a financial institution is easily overlooked. Whether cash, check, credit or debit card, electronic funds transfer, or mobile payment, the data exchanged in every transaction is critical to institutions and individuals alike.

Organizing payments by the data created and disseminated in a transaction, rather than relying on the traditional categorization of payments by physical characteristics, addresses a fundamental tension of payment transactions: Ample data helps financial institutions diffuse anti-money-laundering and fraud risk, but compounds privacy risk. This Sightlines InFocus by Marc Loewenthal and Jim Gregoire argues that focusing attention on the data considerations of payment transactions can help institutions manage this tension — and the mounting data-privacy and security risks of the coming decade.

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