The latest bank authentication and risk analytics tools and strategies are making it safer for U.S. companies to adopt emerging faster payment alternatives.
Emerging U.S. Alternatives
A host of countries around the world have established real-time payment systems. The United States has lagged a few years behind on offering accelerated electronic payment systems but is working to catch up.
The introduction of same-day Automated Clearing House (ACH) credit payments last year was a start, and same-day ACH debit entries are also now available. Previously, ACH transactions settled in one or two days but now the same-day ACH initiative is enabling new capabilities such as same-day emergency payroll and last-minute ACH bill payments if certain cutoff times are met.
Faster yet are new real-time payment systems being launched in the U.S., including Zelle, the person-to-person (P2P) payment network that Fifth Third began making available to clients in June. With Zelle, all you need to deliver money to someone within minutes is their registered mobile number or email address. In the future, Zelle could be a mobile business-to-consumer (B2C) payments option in addition to the P2P payments.
Meanwhile, on the business-to-business (B2B) payments front, a highly anticipated development in the U.S. is the introduction of The Clearing House’s Real Time Payments (RTP) platform. Fifth Third is looking into making this new, easy-to-use payment rail available to clients. A round-the-clock, 365-day-a-year system, RTP will enable almost instantaneous payments.
Pillars of Risk Mitigation
By making electronic payment processing faster and more efficient, these new systems are giving U.S. businesses an even greater incentive to migrate from check issuance to e-payments. At the same time, financial managers need to understand that by dramatically reducing the window of time between payment initiation and settlement, faster payments present a new element of risk: there’s less time to spot fraud and reject payments!
To address this risk with the recent Zelle network rollout, financial institutions can look to establish dollar limits on transactions. In addition, current use of stepped-up authentication in the form of a one-time passcode is required for Payment anomalies and for those initiated with devices outside the norm.
Low dollar limits may not be as viable for B2B transactions, so in preparation for RTP rollout, the industry is working on a real-time payment decisioning framework built upon these four pillars:
- Authentication. Utilizing profiles that take into account parameters such as a client’s typical transaction size and the device typically used to initiate payments. When transactions fall outside these and other designated parameters, the sending bank can reach out to the client and require a one-time passcode to proceed.
- Fraud Scoring. Banks are enhancing fraud detection tools that use behavioral analytics to identify risks in real time. For example, if a client establishes a new payee with a larger-than-typical transaction dollar amount going to a suspicious country, that transaction could be given a high risk score that triggers a fraud alert or transaction block.
- Strategy Rules. Business rules are established and tuned over time to ensure payments outside of certain criteria are delayed and queued up for fraud analysts to review.
- Case Management. When transactions are flagged for review, an alert management system will ensure they are promptly reviewed and decisioned by fraud analysts.
What You Can Do
Although customers are the targeted victims, companies can suffer as well, especially from bad publicity and the loss of trust and customer good will. These steps can help protect a company and its employees from EAC exploitation:
- Keep the company’s internet and computer system security software up to date.
- Use a secure network for customer communications regarding financial matters.
- Do not share account numbers or other account information through email.
- Control internet access for employees by setting up whitelist/blacklist security measures to restrict which websites employees can visit. This can help diminish the risk of downloading corrupted software and programs that could infect a computer with a virus.
- Question unusual language, requirements or urgency from customers regarding funds transfer requests.
Contact your Fifth Third banker to learn more about emerging faster payment alternatives and how you can partner with us to address any related payment fraud risk.