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.
Findexable: COVID-19 hasn’t slowed down fintech investment
The release of Findexable’s 2021 Global Fintech Rankings report seems to confirm that the COVID-19 pandemic has had no deleterious effect on sector growth.
Compiled annually, Findexable’s report provides one of the most comprehensive surveys of global fintech. From regions to countries and individual cities, it compiles and analyses key performance data and gives insight into the leaders and up-and-comers.
In total, the company explored 264 cities across 83 countries and incorporated data from various media outlets, SEO databases, and over 60 fintech associations. CEO Simon Hardie spoke enthusiastically of the findings:
“The level of investment and activity in the fintech sector is hugely gratifying for those of us who have been championing the industry. It is especially good to see that the pandemic didn’t slow down, and may have in fact accelerated, the adoption of fintech in parts of the world that have previously been underserved.”
The leading hubs
Notably, there has been no movement in the 2021 list’s top three fintech hubs. While most others made incremental gains, it was Tel Aviv that made the most significant leap from 20th to 5th. Meanwhile, in a surprising shift, Singapore slipped from 4th to 10th:
- San Francisco Bay (same as 2020)
- London (same as 2020)
- New York (same as 2020)
- São Paulo (+1)
- Tel Aviv Area (+15)
- Berlin (+3)
- Boston (+1)
- Los Angeles (-2)
- Hong Kong (+2)
- Singapore (-6)
The leading countries
Findexable’s top 10 countries for fintech reflect the generally incremental shift observed among the hubs:
- US (same as 2020)
- UK (same as 2020)
- Israel (+9)
- Singapore (-1)
- Switzerland (same as 2020)
- Australia (+2)
- Sweden (same as 2020)
- The Netherlands (-2)
- Germany (+3)
- Lithuania (-6)
UK fintech has continued to ramp up at an accelerated pace: three new cities entered Findexable’s index for the first time, bringing the country’s total up to 13. The country remains fairly secure as Europe’s fintech leader, particularly as strong competitors like Lithuania fell in the rankings. However, Germany’s ascendance to the top 10 could indicate the beginning of a new challenger.
In North America, the US remains practically unchallenged by Canada. Meanwhile, both Australia and China have gained on Singapore, with the former seeming to be a likely APAC leader by 2022 if current trends continue.
As can be observed from the top countries and hubs, Israel’s fintech output has been proportionally one of the most impressive exhibited. It has claimed the top spot for MEA, followed by the UAE and Kenya - both of which also made significant gains. Finally, Brazil and Uruguay lead Latin America and the Caribbean.
Fintech: The global revolution
Reviewing the statistics compiled in Findexable’s report lends credence to Hardie’s words: fintech is greater than ever before and not even one of the world’s most disruptive events (COVID-19) has been able to prevent its growth.
Elliott Limb, Chief Customer Officer of Mambu, which sponsored the report, called every fintech part of a “global revolution” that is transforming financial services for the better.
“They are changing the way we save, spend, borrow, and invest money. Whether competing, cooperating or supporting traditional financial institutions, they are reshaping digital services for a real-time, on-demand world.
“Whether it is an aspiring unicorn, a neobank seeking new markets, a provider that wants to go digital, or a financial institution that wants to act like a fintech, you need a roadmap [...] a guide to where to begin and where to go. This is why a ranking system is important.