As you may have seen this week in the news, the first of the Apple Pay contracts are up for renewal; if you haven’t seen it, here’s a handy link to the article.
Hard to believe time has raced by that quickly. Apple Pay is an interesting reminder in many ways of the real challenges of third party risk management. When it first became available, institutions clamored to be among the early adapters of the new technology. It prompted quite a bit of debate as to how much due diligence was reasonable or practical.
Proper Due Diligence You Should Do for Apple Pay
Remember, you can’t just accept a company based on its name – so push hard to follow your normal approach to due diligence. That's what my team did at my previous institutions. Obviously, we were met with firm resistance and even thinking of another pillar of third party risk management, Apple pretty much dictated a “take it or leave it” approach to the contracts – they weren’t entertaining any edits by institutions.
So here are 2 important things we did that you should as well:
- Properly assessing the risk: From a risk assessment perspective, we were fortunate to have a well-thought out Initial Risk Committee that could go through and carefully consider the new product from all angles – of course, we had no idea exactly what this new product was or how to determine all of the possible risk aspects of it.
- Document questions, concerns and analysis: We thoroughly documented all of our questions, concerns and analysis – and yes, we included subject matters experts from around our institution. I even took this to our senior management and risk committee meetings to discuss and had a very frank discussion with our president and chief information security officer to air my concerns and analysis.
At the end of it all, of course, we approved it and were one of the fairly early Apple Pay connected banks – but the time and effort were both well spent and well recorded.
Proper Due Diligence for Contract Renewal
Now, with it renewing, it’s a great time to update your risk assessment and due diligence to reflect your experience with Apple Pay and how your view of that risk may have changed. You probably still won’t be able to modify the contracts, but at least you will have fully considered all of the risks based on experience.
Apple Pay has been interesting to follow – is your financial institution on board and have you thoroughly documented the appropriate third party risk management narrative surrounding the use of this exciting technology?
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