Faster Payments For Faster Fraud: Protecting Customers In This Real-Time Environment

Foreword

This report, sponsored by NICE Actimize, a global provider of financial crime, risk, and compliance solutions for financial institutions, reviews the advent of real-time payments in the United States, spurred by the FedNow Service, and the fraud risks that financial institutions should be addressing prior to adoption and implementation of real-time payments in 2023. As other parts of the world have already seen and learned, the successful implementation of real-time payments requires planning and groundwork. The U.S. payments system is much more complex and thus requires FIs to identify and work with strategic partners now for successful implementation. Fraud, which also affects U.S. consumers and small businesses more than in other parts of the world, is a real concern that U.S. FIs also must get ahead of, by relying on lessons learned from other international markets and by partnering with experienced vendors. Data for this report, in part, is based on findings gathered as part of Javelin Strategy & Research’s annual Identity Fraud Survey, fielded in October and November 2021. Javelin Strategy & Research maintains complete independence in its data collection, findings, and analysis.

Overview

The promise of faster and real-time payments is finally at a tipping point in the United States, where the new FedNow Service is slated for launch by the Federal Reserve in 2023. FedNow aims to modernize the U.S. payments infrastructure, marking the first introduction of a new payments rail from the U.S. central bank since the 1970s. The concept of near real-time payments (RTP) is not new—peer-to-peer payment platforms such as PayPal have provided near RTP for decades, and The Clearing House’s RTP network, which provides real-time payment options for consumers and businesses through participating banks, launched in 2017. But the FedNow initiative will allow all U.S. financial institutions to clear and settle payments in real time, 24/7/365. It’s a huge innovation for the United States, where the payments ecosystem lags behind those of most other economically developed countries. Still, RTP poses real-time infrastructure and fraud risks, as has been proved in the U.K. and other markets such as Australia and Canada, where RTP has been launched and/or more thoroughly vetted. This report, sponsored by NICE Actimize, a global provider of financial crime, risk, and compliance solutions for financial institutions, reviews the fraud risks FIs should be addressing prior to the adoption and implementation of real-time payments in 2023.

Companies Mentioned:

Automated Clearing House, Bank of Bangladesh, Cash App, FDIC, Federal Reserve, FedNow, Financial Ombudsman Service, FraudClassifier model, Global Legal Entity Identifier Foundation, Interac, MoneyGram, RTP, RTP network, SWIFT, The Clearing House, UK Finance, Venmo, Western Union, Zelle