The financial services industry is racing toward faster payments, driven, we’re told, by consumer demand. But consumers are not likely to be aware of the resources banks need to devote to fighting fraud, and that spend will only increase as payments speed up.
Dwolla caused a stir this week by announcing that its realtime payment system is now free for all transactions. It used to be $0.25. That’s not enough to break the bank, unless you make a lot of transactions.
The conundrum this presents for banks is that customers are being trained to expect fast, safe and free payments — and providing that package is expensive.
More systems offering a similar service to Dwolla’s are sure to follow. Will it also mean, as was seen in the U.K., that faster payments will lead to an increase in digital transaction fraud? It seems nearly inevitable. Simply put, a faster payment puts stress on a bank’s fraud-detection system, more decisions must be made in less time, and more extensive tests would take longer and so defeat the purpose of a realtime system.
Digital transaction fraud is already a tricky proposition, even in less-than-realtime. The IRS reported $50 million in stolen funds (and it was, umm, the IRS’s fault) this week. And we’ve all heard about Apple Pay fraud. (Coming soon: Android fraud! And eventually, Samsung Pay fraud!)
So banks are scrambling to find better methods of authenticating users and biometrics are growing in popularity. Case in point: TouchID was recently added to one of the most-used mobile bank apps in the country, JPMorgan Chase’s, with others certainly following. But the widening use of TouchID to authenticate users of financial services did not satisfy mobile payments pundit Cherian Abraham:
As a consumer, I wud want plausible deniability in my payment txns. I hope curr trend to sign them w/ immutable biometric data is temporary.
— Cherian Abraham (@cherian_abraham) June 4, 2015
Maybe brainwave detection, the latest password-killer, will make him happier?
Mary Ann Miller, fraud executive advisor at NICE Actimize, noted that fraudsters follow the money, and as more money moves into digital payments, fraud will certainly follow.
“Fraud follows popularity and speed, the card business has known this for years,” she said. “What has changed since cards were introduced is the increased use of digital channels combined with speed, mobile and card convergence, and new product innovation.”
She added that fraudsters are quick to adapt to new security measures. But Miller expressed confidence the benefits of faster payments will outweigh the fraud.
“We all benefit from faster payments, as consumers, business owners, financial institutions and even Silicon Valley,” she said. “Opposition can come in after the fact if the implementation does not take into consideration good risk and fraud practices, including onboarding, and building out the fraud controls needed. Safe and secure faster payments builds customer trust and the opposite can break it down. ”
Continuing Apple Pay fraud has not deterred banks from signing onto the service, though consumer adoption is still low. Will customers jump on board the fast, free payment networks now emerging, and if so, how will banks protect them?Like This Post