What is the key difference between direct and indirect risks in payment systems?

The distinction between direct and indirect risks in payment systems is fundamental to understanding how various threats can impact operations. Direct risks are typically immediate and noticeable, potentially leading to direct financial loss or operational disruption. They arise from events that directly impact the payment process, such as system failures, fraud, or errors in transaction processing.

On the other hand, indirect risks are often secondary or peripheral consequences that stem from direct risks. These could include reputational damage, regulatory scrutiny, or loss of customer trust, which may not be immediately apparent but can have long-term repercussions. Because of their less visible nature, indirect risks can sometimes be more challenging to identify and manage effectively.

Thus, the key difference lies in the immediacy and visibility of the threats posed by each type of risk: direct risks present clear and immediate challenges to payment systems, while indirect risks may follow as results of those direct challenges, impacting the overall health of the payment mechanisms.