Understanding the relationship between innovation and risk is particularly important in today’s evolving payment system because concerns about risk can inhibit the adoption of innovative payment products and services. Payment innovations can potentially reduce risk within a payment system, but in a complex environment, innovation may also shift risks or even increase them.
Both the design of payments systems and the way participants use them can affect risk. For example, because a depository institution’s ACH and check systems may not be integrated, stop payments on checks may not work as intended, thereby increasing the risk that fraud may slip through the system.