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Education

Mitigating instant Risks involved with adopting instant payments

A key benefit of instant payments is the ability for
fraud in instant consumers to have irrevocable payments; however, this
gives financial institutions (FIs) significantly less time
payments to assess the fraud risk of a payment while funds are
transferred or withdrawn by subsequent transfers.

The combination of using instant payment networks
and digital channels that operate 24/7 allows fraudsters
to strike by performing transfers during periods when
capacity for manual review is the lowest.

Real-time fraud is an emerging threat that will grow in size
and severity as the use of faster payment methods gains
momentum. Mitigating these risks should be a priority
for banks and other FIs that provide faster payment
capabilities to their account holders.

Combating fraud risk requires real-time fraud scoring
and a high level of automation, which is only achievable
through advanced artificial intelligence with configurable
rules and policies geared toward stopping fraudulent
payments.

Instant payment fraud schemes
By Calin Sandru Instant payments fraud schemes come in a variety of
ARGO forms. Account takeovers involve fraudsters gaining direct
or indirect access to a user's online or mobile banking
he adoption of faster payments in markets account. Once fraudsters compromise an account, they
worldwide is based on the demand from con- can initiate transfers or purchases that will appear to be
sumers and businesses for quick, convenient authorized by the account holder.
T and immediate funds availability. Instant pay-
ments have been making waves in recent years, enabling Account takeovers can happen in three ways. The first
consumers and businesses to send and receive funds in way involves an attacker obtaining a user's credentials or
real-time with 24/7 availability, along with rapid access abusing the account recovery process to gain direct access
to funds and just-in-time payments to manage cash flows. to the account. A second method involves the fraudster
using malware to access a user's device. The third form of
Other benefits include: account takeover occurs when fraudsters socially engineer
a user into carrying out their wishes.
• Individuals have instant access to their paychecks and
the ability to spend funds on the same day. Direct debit or auto-pay is a common target for criminals
• Small businesses gain improved working capital looking to exploit instant payments. Direct debit fraud can
management with immediate access to invoice happen when a debit is taken from an account without
payments. a valid direct debit request. Consumers often use direct
• Consumers can make last-minute payments to bills on debit to allow another party to withdraw funds to pay
the due date, potentially avoiding late fees. for recurring costs like utility bills and rent. Consumers
can also use direct debit to withdraw money from their
checking accounts on a specific date or at regular intervals.
In addition to the Clearing Houses RTP (Real Time
Payments) Network going live in 2017, and the Federal
Reserve's FedNow Service launching in 2023, instant Business email compromise and vendor impersonation
fraud are types of fraud that exploit vulnerabilities within
payments are poised to disrupt the payments and financial
services landscape. However, without the proper controls, a customer's professional organization. Fraudsters can
deceive the customer's personnel, processes and systems
the benefits offered by faster payments can be nullified by
'instant' fraud risk. convincing the organization to voluntarily send payments
to accounts controlled by fraudsters.

The FBI identified this type of fraudulent practice as one
of the fastest growing and financially damaging crimes

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