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FPC Releases Faster Payments Fraud Prevention White Paper

Reed Luhtanen, Executive Director, FPC

“Faster payments equals faster fraud.” It’s the proverbial phrase that has echoed throughout the financial services industry since faster payments were introduced in the United States (well, even before they were formally introduced.) And there is possible merit to it. A recent FICO study of Asia-Pacific banks found that 78% of them experienced increased fraud losses due to the introduction of real-time payments platforms. Studies like this one highlight the ongoing need to prioritize fraud mitigation as we continue to drive to ubiquity in faster payments.

While we haven’t seen that kind of activity in the United States, fraud will always remain a concern. And that’s why we focus on risk mitigation within the payments system. Because the time to spot and stop fraud shrinks in this new faster environment, the Faster Payments Council has prioritized this topic among its work efforts, recognizing it as critical to the success of faster payments in the United States.

For this reason, the FPC has leveraged its members’ deep expertise to identify enhancements that will make the current fraud information sharing processes more efficient and effective. In addition, the FPC continues to identify those initiatives that will help foster better user experiences, bolster confidence and trust in faster payments, and facilitate faster reaction times to address threats to the ecosystem – ultimately supporting the further advancement of faster payments. In fact, in 2019 the FPC produced our members-only Transparency Guidelines for PSPs – Consumer Transactions to provide guidance to the industry regarding key items related to end-user transparency. 

With those goals in mind, the FPC just released its latest white paper, Examining Faster Payments Fraud Prevention, a fresh look at the current fraud themes and trends, and approaches for mitigating these risks in a faster payments environment. This paper builds upon members-only content such as the Consumer End-User Safety and Security FAQs we released earlier this year. In assessing potential fraud in today’s speedier environment, this new white paper outlines connections to the fraud schemes we’ve been dealing with in the payments system for some time now. Fraud related to identify theft, account takeover, synthetic identity, and social engineering remain continued threats. But new ones are emerging.

For instance, the paper points to a new type of fraud, an Authorized Push Payment (APP) scam. Described as a “a fast-growing fraud method being perpetrated in this faster payments environment,” the paper reports that “APP fraud occurs when fraudsters deceive consumers or individuals at a business to send them a payment under false pretenses to a bank account controlled by the fraudster, after which the fraudster transfers the money through a series of accounts in seconds to hide their tracks before the sender has time to realize the deception.” These attacks can happen to both consumers and businesses, and through common fraud techniques, such as a phony request for money through a forged invoice or email. But regardless of the tactic, this type of fraud does exploit the speed in which money moves in a faster payments environment.

These new modes of fraud, combined with existing methods we’ve been fighting for years, make the work of the FPC all the more important. Identifying and promoting mitigation tactics today will serve us well as faster payments adoption ramps up. Measures like payment tokenization and directories; enhanced login authentication with biometrics; transaction monitoring leveraging artificial intelligence and machine learning; and even increased education and awareness – these are the tools that will help keep faster payments and users of these payments safe. 

As the paper calls out, “...we can expect fraudsters to do what they do best — exploit and manipulate any weaknesses in the ecosystem.” But we’ll continue to do what we do best: work to thwart fraudulent activity through cohesive, strategic plans fostered by leaders in the faster payments movement. 

So, while faster payments may introduce the potential for fraud to occur more quickly, it can be prevented. The FPC will continue to develop tools and resources to support the industry in fighting fraud, and other challenges to faster payments adoption. 

To learn more about the latest fraud trends and mitigation tactics highlighted here, and more, be sure to download our latest paper: Examining Faster Payments Fraud Prevention. To find additional resources to support the advancement of faster payments, visit the FPC’s Faster Payments Knowledge Center and consider joining the FPC today to gain access to our exclusive members-only content.
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