Verafin
Faster payment channels are relatively new within the U.S. compared to its use in countries around the world. However, what may be perceived as a lag in technological adoption in the U.S. should be considered an opportunity for financial institutions to implement the appropriate checks and balances to get ahead of the anticipated fraud that will happen in this space.
The very features that make faster payments convenient to customers - instant, irrevobable, high-limit transfers - also make them appealing to criminals. Jurisdictions where faster payments are well established are experiencing what some call a fraud epidemic. Traditional fraud monitoring solutions that financial institutions have long relied on have proven inadequate in managing and preventing fraud in the realm of faster payments.
Schemes and Scams: A U.S. Perspective
Year over year, fraud losses have been growing at an alarming rate. Led by social engineering and Authorized Push Payment scams, traditional authentication controls utilized by financial institutions have been rendered ineffective. Fraud is surging at a rapid pace with losses associated with Business Email Compromise surpassing $50B since 2013. Meanwhile wire fraud is up, and investment scams have increased 127% from 2021-2022. Criminals are utilizing impersonation tactics to enable fraudulent payments across all channels in record numbers.
The Anticipated Growth of Faster Payments
The potential transaction volumes and use cases for faster payments have yet to be realized in the U.S., but early projections indicate transaction volumes will grow quickly. FedNow® which launched in July 2023 had 108 institutions sending and receiving by October, while TCH RTP®, which launched in November 2017, had 351 institutions using the service and reported 64M transactions in the 3Q for 2023, representing 11% volume growth and 18% value increase. When buy-in grows across financial institutions and their consumer bases, institutions will need to scale quickly to meet demand, and the fraud that will accompany it.
When Opportunity Knocks
Faster payments are instant and irrevocable, as a result, fraud monitoring capabilities have to be able to detect nefarious activity quickly, while not hindering the faster payment process. The question that remains is how do financial institutions prepare to meet their customers’ demands while simultaneously curtailing criminal advances?
The financial system has an opportunity right now to prepare to scale their fraud prevention approaches and get ahead of the fraud already rooted in other payment channels. Doing so requires a cross-institutional view of risk on both sides of a transaction that can successfully circumvent evolving fraud trends.
A Step Ahead with Verafin
Verafin offers a unique Real-time Payments Fraud solution that combines behavior-based analytics with insights from our consortium of over 2400 financial institutions and 575 million profiled accounts, to enable comprehensive insights — without sharing Personally Identifiable Information (PII).
Our consortium analytics reduce false positives and alert you to true risk when a payment is destined to an account that is unknown to the network. Our approach effectively detects fraudulent transactions, allowing financial institutions to validate payments with the help of the consortium to ensure the transfers are destined to a trusted beneficiary — protecting your institution and your customers.
The demand for faster payments will continue to grow and while volumes are currently manageable, now is the time for institutions to consider a robust and effective fraud solution to meet the coming challenges and future demand.