Faster Payments

Faster Payments (Doesn’t) Mean More Fraud

Some have said that with faster payments comes more fraud — and that fraud could be on the rise due to Same Day ACH. NACHA talked to the financial institutions who drive 66 percent of ACH volume and got quite a different story.

Are faster payments too fast for their own fraud good? What seems a boon to payments may be a liability, at first glance. Speed means less time at hand to ensure that payments are on the up and up and that they are getting to the right people or entities at the right time.

But in a qualitative study of nearly two dozen financial institutions that drive 66 percent of the ACH volume, NACHA found that fraud attempts and success, scaling as some would think, along with same-day payments functions, simply wasn’t there.

In an interview with Karen Webster, Jane Larimer, Executive Vice President at NACHA, said that the organization has gone out and surveyed 23 financial institutions, which comprise about 66 percent of ACH origination volumes, and asked whether they have seen any increase in fraud due to Same Day ACH.

“And zero percent, nobody, said yes,” she said.

And in fact, Larimer added, some of these firms have seen articles in the press speculating on fraud increases and have notified NACHA that they themselves have not seen any trends to that effect, at least as can be tied directly to same-day activities.

The conventional wisdom is, however, that the faster money moves, the less time there is to react, Webster said. But NACHA has been working with financial institutions over an 18-month period so that the latter entities could put any increased fraud detection measures in place at the upfront to mitigate any problems related to speed.

Other factors are in place to address initial concerns about transaction risk and cash management, said Larimer, who noted that the transactions have a $25,000 limit. “That, in and of itself,” said the executive, “limits the risks of fraudulent higher-value transactions.” She also noted that there are no international transactions allowed.

As for Webster putting forth the speculation that bank account numbers will become more valuable than credit card numbers (for fraudsters) due to continued rollout of Same Day ACH products, Larimer stated that those concerns may be voiced by some but are really unfounded. During adoption of Same Day ACH, she said, the banks were focused on process, with attention on what to do in case flags came up on certain transactions. “When you think about it, originating ACH does not have the anonymity that card payments have” (and thus the lure for malfeasance).

As for other qualitative findings, NACHA reported that 90 percent of originating institutions found that Same Day ACH volumes were higher or as anticipated, and 83 percent of receiving institutions said the same. Additionally, the findings showed financial institutions saw use of same-day transactions by various-sized business, with 84 percent seeing middle-market use. And 95 percent of businesses used same-day transactions for payroll.

And the future may be bright as 80 percent of surveyed financial institutions expect to see Same Day ACH volume grow “at a steady rate” through the next six to nine months.

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