With the central bank digital currencies (CBDCs) and blockchain in active discussion, and the FedNow Service in the news, payments are still an exciting growth business, despite the fact that they’ve been around for so long.”
Topping the list has been the move to faster payments in the United States, where the transfer of funds in real time represents a seismic shift in money movement that brings with it a knotty problem of faster fraud.
What’s on the Horizon - more fraud!
The attack vectors and points of vulnerability don’t lie within banks’ infrastructure or the payments ecosystem. They’re round in on platforms in the real world, where unwitting account holders are tricked into making payments they hadn’t intended to make — or they’re sent to fraudulent accounts through push payment fraud and misdirected payments.
The rise of faster fraud has put pressure on the financial institutions (FIs), and specifically on their know your customer (KYC) processes and account opening checks. The issue is underscored by PYMNTS Intelligence, which showed the cost of fraud has been on the rise for nearly half of FIs as measured against last year. Misuse of account information is tied to more than a third of fraudulent transactions as bad actors impersonate banking officials, the IRS or take on other authoritative personas via social engineering. The fraudsters are using advanced technologies, too, to try and make off with ill-gotten gains.
No Magic Bullet
There’s no single solution that represents the proverbial silver bullet or magic wand. But banks have several weapons at hand to combat fraud, chiefly through the data they have, and smart analytics that can make use of that data while the payments are still flowing. There are already some advances seen in the U.K. that have been somewhat useful in battling fraud, as confirmation of payee helps ensure that account numbers and names match the intended recipient.
Building robust lines of defense is imperative for FIs as regulations and mandates dictate that banks implement fraud protection technology. In the U.K. for yet another example, new liability rules that will go into effect in 2024 have moved tech investments to high-priority status. And banks have a moral obligation to do everything they can do to keep their customers safe.
The card-based schemes have had best practices in place when it comes to real-time fraud prevention because they have the on-the-ground insight into eCommerce and point-of-sale activity, he said.
There’s an extra buffer of security — in proof of concept with several banks — added that the risk scoring happens in near real time (in the space of milliseconds) when the payment has yet to be sent to the central infrastructure or to clearing and settlement.
And the AI that we use … will provide the highest level of protection in real-time payments.
For more details on how AI can prevent fraud in your business, contact KenGivens@USmsTexas.com; Phone: 512 848 1069
Article credit to Form3 CEO Michael Mueller and PYMNTS Karen Webster
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