FIs Look to Advanced Technologies to Protect Faster Payments

Disbursements are a critical part of the modern economy, with more than 170 million consumers in the United States receiving at least one within the past year. These come in many flavors, including Social Security payouts, insurance claim payouts and retail refunds. These payments all share one feature for consumers: They could be faster. According to a PYMNTS Intelligence survey, roughly half of U.S. consumers who receive disbursements would choose to obtain them via instant payment rails if they could, with faster payments providing convenience and a powerful advantage in cash flow transparency and money management.

Accelerated payments are not invincible, however. Faster transactions are susceptible to the same social engineering techniques fraudsters have employed to target legacy systems — but with the added twist that funds intercepted via faster payments are often irrecoverable due to their speed. Fortunately, real-time solutions are rising to meet the challenge. Companies can confidently offer their customers the convenience of faster disbursements while proactively keeping them secure from fraud.

The “Money Mobility Tracker®” examines how financial institutions (FIs) are leveraging advanced technologies such as artificial intelligence (AI) and machine learning (ML) to oversee significant drops in faster payments fraud.

Faster Payments Demand Faster Fraud Tools

While faster payments offer increased ease and convenience for consumers and businesses, accelerated funds lost to fraud are seldom retrievable, as opposed to slower payment methods, allowing for more time to reverse the transaction. This makes prevention paramount.

With 78% of FIs and businesses calling faster payments a “must-have” for their organizations, enthusiasm for instant payments adoption has never been higher. Nearly 9 in 10 FIs say they plan to adopt the FedNow® Service or The Clearing House’s RTP® network within the next two years. Meanwhile, 76% either already offer or plan to implement the instant payments network Zelle. With so many financial players moving toward faster payments, implementing best practices to protect from fraud is an essential step in that process.

To learn more, visit the Tracker’s Fraud Meets Faster Payments section.

Advanced Technologies Effectively Curb Disbursements Fraud

Technologies such as AI and ML are highly effective at securing faster transactions by identifying minute account and transaction discrepancies and patterns that would evade human detection. AI and ML offer a range of capabilities, one of the most notable of which is the detection of payments fraud. AI systems can continuously monitor financial transactions from end to end in real time to identify fraudulent login attempts, anomalous transactions and suspicious or fake accounts. These technologies can speed decision-making in faster payments environments by validating users and analyzing data much faster than human analysts can. In addition, through their capacity to learn, the technologies’ ability to spot unusual payment behaviors or account usage is always improving, making these tools especially useful in applications for detecting account takeover (ATO) fraud — the top risk in faster payments fraud.

To learn more, visit the Tracker’s Faster Fraud Combatants section.

Third-Party Solutions Yield Faster Payments Fraud Protection

FIs that find it difficult to implement AI- and ML-based fraud solutions on their own can alleviate this burden with third-party offerings. Many FIs lack the technical staff to make advanced fraud prevention a reality. Recent PYMNTS Intelligence research shows that while many FIs still use in-house teams to develop fraud prevention tools, the desire to incorporate more advanced technologies for this purpose has pushed many to consider external providers.

On average, FIs develop 48% of the technologies they use to combat fraud in-house, such as customer transaction alerts. Meanwhile, only 14% of FIs develop fraud-fighting AI and ML technologies in-house due to the substantial costs and expertise involved. The report estimates that as AI and ML become the standard tools for advanced fraud protection, 70% of FIs will rely on third-party solutions to leverage ML, AI and fraud scores provided by payment processors.

To learn more, visit the Tracker’s Overcoming Implementation Challenges section.

About the Tracker

The “Money Mobility Tracker®,” a collaboration with Ingo Payments, examines how FIs leverage advanced technologies to oversee significant drops in faster payments fraud.