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Real-Time Payments and Fraud: Who is Winning?

Graphic of hand with dollar bills above itThe emergence of real-time payments around the world is a game-changer for retailers and other companies that want to improve their customer experiences. The real-time payment systems deliver instant interbank electronic fund transfer service on a 24/7 basis. The payment can be initiated through numerous channels, such as mobile devices like smartphones and tablets, via digital wallets, or through the web.

In 2017, the European Union introduced SEPA Credit Transfer Instant, while the Clearing House Faster Payments went live in the United States. A year later, Australia followed with its New Payments Platform (NPP). Now, Canada plans to launch its real-time payments scheme by the end of 2019 or in 2020.

However, this new type of rapid-fire transaction has also attracted the attention of criminals. With an execution time of mere seconds on these real-time payments, it doesn’t leave much time for banks or payment networks to snag these fraudsters, either. So, who is going to win?

Consumers Enjoy Fast Payments

Whether a consumer shopping online or a gig worker, everyone likes the idea of faster transactions or accelerated wage access. The result is better customer experiences for online shoppers who like to check out quickly so they can move onto other tasks.

For freelancers who work with multiple companies and use online payment services, they can simply click a button for instant transfers into their bank account rather than waiting one or more business days to receive the money.  

Banks and Payment Networks See Greater Operational Risk

While consumers just see the convenience of real-time payments, those behind the transactions must contend with greater transactional complexity and the need for new operational mechanisms.

It means potentially investing in new technology and platform to deliver more agile systems to catch suspicious activity despite the compressed transaction timeframe. Policies and procedures must also be updated to define and address the increased operational risk. What these institutions and payment processors have quickly learned is that the traditional rules-based approach no longer works because it takes too long and doesn’t account for all potential risk factors. 

Fraudsters See a Greater Opportunity

Fraudsters have an opportunity to enact more of the schemes they currently use. These schemes include using malicious software (malware), account takeover attacks, synthetic ID fraud, mule accounts, and bust-out schemes.

What doesn’t help is that users continue to rely on poor password creation and fall victim to schemes that plague all types of transactions, especially peer-to-peer (P2P) payments.

Speeding Transactions Without Compromising Security

Progress in other areas of the world can help all financial institutions address how to minimize fraud. For example, regulators in the European Union (EU) are addressing ways that they can reduce the cost of transactions to help payment providers focus on adding more security technology to minimize fraud specifically in cross-border payments. 

One approach for financial institutions is to look at adding machine learning and artificial intelligence capability, as well as biometric security features. The technology has the ability to quickly process data, employ behavioral analytics, and recognize patterns that signal potential fraud in mere seconds. The speed offered by device intelligence tactics can help real-time payment progress, while stopping fraudsters who may be employing social engineering, like phishing, to trick people.

Education and Investment Will Beat Fraudsters

Leading the way to proactive change and more secure real-time payments, payment platform companies are partnering with financial institutions, like banks and credit unions. This “meeting of the minds” focuses on sharing best practices for fraud-prevention measures for real-time payments.

Additionally, you can help your customers better understand how fraud happens. Providing them with more education on what to consider when paying or receiving payments online can help reduce the number of people being tricked by these social engineering schemes.

Real-Time Payments Win

With proactive approaches to security, real-time payments offer more instant ways to pay and get paid. The future of payments offers benefits like same-day payroll to help businesses pay their hourly workers or provide greater flexibility to address late or emergency payrolls. Other payment options enabled by real-time functionality include expedited bill payments via ACH credits and debits.

Consumers can make on-time bill payments all the way up to and including the actual due dates, while companies can provide quicker late payment credits. Also, B2B real-time payments mean faster invoice payment settlement. Finally, account-to-account transfers offer a way for consumers to move money between multiple accounts at a much faster rate. 

Sounds like it’s real-time payments for the win!

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BluePay is pleased to bring you this valuable information from, Due, makers of a free digital wallet that allows users to easily make and accept payments online.

Topics: Partner Posts, Financial Institutions, Payment Technology, PCI Compliance and Fraud Prevention, Consumer Education

Welcome to the BluePay Blog!

Whether you're a small business, an enterprise corporation, a financial institution, or a software partner, we have created a series of blog posts to help you and your customers, learn more about the complex nature of payments. Take a look to learn how payments can help to simplify your business operation, and may even help to grow your revenue.

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