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Preventing Payments Fraud in a Flash

Financial services, and payment systems in particular, continue to transform at a great pace. Such transformation, and the speed with which money can now move, provides consumers of financial services with more choice and greater convenience.

As transaction speeds increase and real-time payments proliferate, efficiency, flexibility and a clear understanding of consumer expectations have all become higher priorities for financial institutions. Managing fraud is critical to financial institutions in a world of instantaneous payments and real-time settlement.

We are all invested in the financial system in some way, whether we run a small cash intensive business, work in financial services, or send electronic payments around the world to our families over ever faster [payment] rails. Security is expected by consumers of financial services and these expectations go hand in hand with expectations of frictionless payments.

Achieving secure real-time payments requires more than simply performing the same risk management and fraud prevention steps faster. Succeeding in a real-time payments’ environment means preventing real-time fraud. This requires employing up-to-date processes and technologies to meet increasing client expectations, while still controlling financial crime risk.

Keeping up with customer expectations

When it comes to real-time payments, every step of the transaction, including fraud detection, must be completed within seconds. Customer expectations are driving this need for speed, and, in some countries, regulators are already mandating processing timeframes.

Beyond speed, customers want to initiate real-time payments whenever and wherever they choose, with immediate confirmation the payment is complete. And if there is an issue, they want immediate resolution.

Delivering those capabilities requires financial institutions make support and fraud teams available 24/7, both to help users and detect new threats launched outside of traditional banking hours – a growing concern in an increasingly global economy.

Understanding real-time payments

The immediate availability of money sent via real-time payment infrastructures makes the risk of loss different than with other types of transactions. Once a real-time payment has been accepted by the payee’s financial institution, the money is deemed irrevocable, which makes fraud detection and prevention even more important.

However, while real-time payments are applicable across a broad range of transactions, fraud detection systems have historically been designed for a specific type of transaction, such as card payments. Real-time payments require fraud prevention solutions be ready to detect every possible type of fraud.

Ideally, these solutions should be fully connected and able to leverage data across all payment types to help analyse, predict and prevent fraud. While this has yet to become a reality, as new threats continue to emerge, financial institutions cannot afford to implement fraud prevention solutions in a piecemeal fashion. Technology partners should be pressed to deliver holistic and integrated payments and fraud solutions that position financial institutions to take advantage of real-time payments without being taken advantage of by fraudsters.

Leveraging data to get smarter

With ISO 20022 message sets being adopted as the new industry standard for electronic data exchange between financial institutions, real-time payments are able to carry much more data. While the additional data can help determine if a real-time transaction is fraudulent, analysing it all takes time. Many traditional ATM, automated clearing house (ACH) and card-based fraud detection systems haven’t been equipped to process the influx of data and utilise it to effectively combat fraud.

Financial institutions can address this challenge and leverage data to their advantage by adopting machine learning and artificial intelligence (AI) technologies. These technologies can perform millions of fraud checks within seconds, continuously learning from the data to become more accurate and effective over time. By implementing solutions that incorporate these technologies, financial institutions will be well-positioned to combat emerging threats, as well as continue providing the services that customers demand.

Tackling today’s threats

Notable threats to real-time payments include account takeovers, invoice redirection and authentication fraud of the party authorising the initiation or receipt of the payment. While there is not yet a single system to manage all of these threats, specialised solutions can be layered to mitigate the probability of a successful attempt for each scenario. For example, multifactor authentication and identity verification can provide layers of security to prevent impersonation of an authorised user and subsequent authentication fraud.

Utilising biometrics and tokens, as well as enforcing complex password requirements, can all enable secure and effective authentication. Similarly, account takeover prevention relies on cybersecurity applications, such as anti-malware, firewalls and network and back-office protections, to prevent malicious actors from taking over or creating accounts with stolen credentials and identities.

Analytical services with machine learning and AI capabilities are essential in preventing crimes such as authorised push payment fraud or invoice redirection. Machine learning capabilities deliver the speed and analytical processing power to analyse multiple data sources at the speed needed for real-time payments, and AI can be deployed to interrogate requests as they come in.

Security and speed as a differentiator

In today’s financial services environment, it’s impossible to predict all the patterns and types of fraud that can impact real-time payments. However, financial institutions can stay on top of today’s new and emerging threats and combat them head on by adopting flexible tools that offer protection today and preparation for tomorrow, while allowing them to easily monitor new channels and transactions. Having the latest risk management and cybersecurity capabilities in place alongside real-time payment offerings can give financial institutions a competitive edge as they balance customer expectations for speed, ease and convenience along with the need for secure transactions.


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Andrew Davies

Andrew Davies

VP Global Market Strategy


Member since

27 Jun 2016



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