ACI Worldwide and GlobalData are working on enhanced fraud detection tools to reduce real-time payments’ APP fraud risk. Effective fraud methods protect clients and revenue while exploiting real-time payment benefits.
According to ACI Worldwide’s Prime Time for Real-Time 2023 research, one in five worldwide consumers fell victim to payments fraud in the last four years, with Authorised Push Payment (APP) frauds emerging as the top fraud concern.
In APP scams, con artists force honest users to transfer money to accounts under their control. Real-time payment system growth necessitates fraud detection, which calls for sophisticated AI capabilities and rich data analysis made possible by ISO 20022.
Push payments’ quick settlement and reconciliation reduce the window of opportunity for fraud detection, but new technology enable accurate and prompt detection and action.
The necessity for banks to shift their focus away from conventional protections against check and card fraud was emphasized by Cleber Martins, head of payments intelligence and risk solutions at ACI Worldwide.
According to Martins, “APP scams are on the rise as fraudsters take advantage of people’s infirmities and flaws in bank safeguards to manipulate mule accounts to accept money from fraudulent activities and facilitate other illegal transactions. “Banks need to stop relying on conventional safeguards intended to stop check or card fraud in order to protect their clients and revenue.
To take advantage of the security of real-time payment rails and to benefit from real-time payments without having fraud management turn into a cost center, “they need to arm themselves with the right fraud strategies.”
Over a third of the £1.2 billion in fraud that was committed in the UK in 2022 was committed through APP scams. In order to counter this, the UK Payment Systems Regulators updated the Faster Payments system’s compensation policies for APP scams.
With costs split between sending and receiving payment firms, this effort assures that payment providers compensate in-scope clients who become victims of APP fraud. The regulatory action creates a unified front against APP fraud and promotes cooperation between financial institutions in the fight against fraud.
Australians will lose more than AU$3 billion to scams in 2022, thus Australia has prioritized the fight against them. The Fraud Reporting Exchange technology, just unveiled by the Australian Banking Association, enables banks to cancel numerous fraudulent transactions connected to the same scam and share knowledge to stop further losses.
In order to improve cooperation and information sharing across banks, telecommunications, and digital platforms, the government’s strategic plan for the payments system calls for the creation of the National Anti-Scam Centre and the creation of industry anti-scam codes.
While some markets have dealt with APP scams in a reactive manner, the upcoming launch of the FedNow® Service in the United States presents a chance to deal with real-time payment fraud in a proactive manner. The US banking and finance sector will need to update risk management technologies and tighten controls as the volume of real-time payments is anticipated to rise dramatically.
The research from ACI Worldwide offers a three-step procedure for preventing real-time payment fraud.
- First, cross-industry coordination and contextualized decisioning can safeguard enterprise-to-enterprise transactions.
- Second, decision-making is accelerated by machine learning, ensuring prompt detection and action.
- The weakest link is strengthened via two-way communication, enabling banks and financial institutions to flag risk while preserving a seamless consumer experience.
Inside Real-Time, a new multi-channel media platform launched by ACI this year, offers content addressing the most recent advancements and prospects in the real-time payments industry. Each episode “unmasks the many faces of fraud associated with real-time payments” in a new four-part video series of season three that focuses on fraud management.