Preventing concurrent fraud in real-time payments
The emergence and growing availability of real-time payment systems is changing the way people move and manage money, bringing more choice and greater convenience. Greater payment speed has not, however, diminished the need for security. Quite the opposite, in fact, as real-time speeds shrink the window in which potentially fraudulent transactions can be stopped. Managing fraud is critical to financial institutions in a world of instantaneous payments and real-time settlement.
Securing real-time payments requires more than simply deploying the same risk management and fraud prevention solutions faster. When it comes to real-time payments, every step of the transaction processing lifecycle, including fraud detection, must be completed in fractions of seconds. This requires a ground up, designed for real-time approach, which leverages up-to-date processes and technologies in order to meet increasing customer expectations while effectively managing financial crime risk.
Keep pace with customer demand and regulatory requirements
Customers expect quick and seamless transactions. They want to initiate real-time payments whenever and wherever they choose with immediate confirmation that the payment is complete. If there is an issue, they want an immediate resolution.
And, in some countries, regulators have already begun mandating processing timeframes.
The move to real-time payments requires financial institutions to make support and fraud teams available 24/7, both to assist customers with their needs, as well as detect threats which emerge outside of traditional banking hours – a growing consideration in an increasingly global economy.
Employ a holistic approach
The immediate availability of real-time payments 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 transaction is often considered irrevocable, which makes fraud detection and prevention even more important.
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. This siloed approach can limit fraud detection, and is not necessarily the best approach for real-time payments. Effective real-time payment fraud prevention requires solutions able to detect many possible types of fraud across all channels and payment origination mechanisms.
Ideally, these solutions should be fully connected and able to utilise data across payment types and channels to help analyse, predict and prevent fraud. As threats continue to evolve and increase in number, financial institutions cannot afford to implement fraud prevention tools in a piecemeal fashion. Technology partners should be pressed to deliver holistic and integrated payments and fraud solutions that enable financial institutions to take advantage of real-time payments without being taken advantage of by fraudsters.
Get smarter with data
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 this additional data can help determine if a real-time transaction is fraudulent, the analysis takes time. Many traditional ATM and card-based fraud detection systems haven’t been equipped to process all the incoming data and utilise it to effectively tackle fraud.
Financial institutions can address this challenge and leverage broader data sets to their advantage by adopting machine learning and artificial intelligence (AI) technologies. These technologies can perform millions of fraud checks within seconds and continuously learn from the data to become more accurate and effective over time. By implementing solutions that incorporate these technologies, financial institutions will be in a strong position to combat emerging threats while continuing to provide the seamless interactions that customers want.
Combat current threats
Account takeovers, CEO fraud and authentication fraud are among the most prevalent threats to real-time payments. Intelligent fraud solutions can be deployed to mitigate the risk of a successful attempt for each scenario. For instance, multifactor authentication and identity verification can provide layers of security to prevent impersonation of an authorised user and subsequent authentication fraud.
Employing capabilities such as biometrics and tokens, and enforcing complex password requirements, can facilitate secure and effective authentication. Cybersecurity applications such as anti-malware, firewalls, and network and back-office protections can also prevent malicious actors from taking over or creating accounts with stolen credentials and identities.
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Analytical tools 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 swift, analytical processing power required to analyse multiple data sources at the speed needed for real-time payments, while AI can be used to interrogate requests as they come in.
Differentiate with security and speed
Given the increasingly sophisticated and continually evolving nature of the threats impacting financial services providers, it’s impossible to predict the patterns and types of fraud that can affect real-time payments. However, financial institutions can prepare for whatever comes their way by adopting solutions that offer protection for current risks with the flexibility to adapt as the threat landscape changes.
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.
BIS and MAS publish blueprint for cross-border payment idea
The Bank for International Settlements and the Monetary Authority of Singapore (MAS) has published a proposed blueprint for the multilateral linking of domestic real-time payment systems across borders.
The blueprint, titled Project Nexus, outlines how countries can fully integrate their retail payment systems onto a single cross-border network, allowing customers to make cross-border transfers instantly and securely via their mobile phones or internet devices.
The Nexus blueprint was developed through consultation with multiple central banks and financial institutions across the globe. It builds on the bilateral linkage between Singapore's PayNow and Thailand's PromptPay, launched in April 2021, and benefits from the experience of the National Payments Corporation of India's (NPCI) development and operation of the Unified Payments Interface (UPI) system.
The Nexus blueprint comprises two main elements:
- Nexus Gateways, to be developed and implemented by the operators of participating countries' national payment systems, will serve to coordinate compliance, foreign exchange conversion, message translation and the sequencing of payments among all participants. These gateways will be predicated on a common set of technical standards, functionalities and operational guidelines set out within the proposal.
- An overarching Nexus Scheme that sets out the governance framework and rulebook for participating retail payment systems, banks and payment service providers to coordinate and effect cross-border payments through the network.
“To achieve significant cost-reduction in cross-border payment transfers, enhancements must be made on two fronts: direct connectivity between domestic faster payment systems, and frictionless foreign exchange on shared common wholesale settlement infrastructures. The BIS Innovation Hub Singapore Centre is working on both. The Nexus project maps out a much-needed set of standards to achieve seamless cross-border payment systems connectivity.” said Sopnendu Mohanty, Chief FinTech Officer, MAS.
How do cross-border payments work?
Cross-border payments are currency transactions between people or businesses that are in different countries. The sender will choose a front-end provider, such as a bank or a money transfer operator (e.g. Transferwise), to initiate the payment. The receiver then receives the payment via the medium specified by the sender. Traditionally, cross-border payments flow via the correspondent banking network (CBN) which most front-end providers use to settle the payment. But, in recent years, new back-end networks emerged to optimise cross-border payments and enable interoperability between payment methods and provide senders with more possibilities to reach the receiver.
The increased international mobility of goods, services, capital, and people have contributed to the growing economic importance of cross-border payments. The value of cross-border payments is estimated to increase from almost $150 trillion in 2017 to over $250 trillion by 2027, equating to a rise of over $100 trillion in just 10 years.