With the growth of FedNow, real-time payments are increasingly a topic of discussion among bankers. However, the shift to real-time introduces new worries about fraud. A concern among bankers who we’ve talked with is that once a payment is sent, it’s gone. When a bank reimburses a customer for a fraudulent transfer, it pays the costs of recovery and must try to recoup those funds. That potential puts bankers on edge — and contrasts with ACH, which leaves time to reverse fraudulent transactions.

With foresight, though, the speed per se of real-time payments shouldn’t be a fraud issue, and fraud opportunities may be fewer than for ACH. Fraud risk from real-time payments and ACH overlap — the risks of account takeover and social engineering scams exist for both. But real-time payments, which are push-only, don’t suffer from pull-payment fraud, which ACH does. Rising check fraud, which will never be relevant to real-time payments, has been a big part of this conversation. Account takeover and social engineering protections thus are likely a worthwhile focus, as such scams are growing more popular and apply across payment rails.

Getting these solutions in place reduces the speed issue for real-time payments because it improves prevention capabilities and puts greater emphasis on shoring up defenses ahead of any activity. Moreover, fraudsters could end up disproportionately attacking ACH because of its weaknesses regarding pull payments — it’s probably easier to steal a check or account and routing information than to break into an account with robust access protections or roadblocks to suspicious transaction activity. According to conversations we’ve had, that may already be playing out.

Ultimately, bankers should adopt features and solutions that stop payment fraud before it causes damage no matter the rail. Modern features that help prevent account takeover, for example, include multifactor authentication, device fingerprinting, and behavioral biometrics. Machine learning-driven analysis of customer behaviors helps flag abnormal transactions, which may prevent losses from an account takeover or prevent suspicious transactions related to social engineering.

Payment speed and irrevocability are red herrings for types of payment fraud that are popular and may become even more so. 

This article previews some of what we’ve learned about the state of payments technology, based on interviews across the banking industry. Stay tuned for more articles that cover our findings, and a deep dive into payments, core, and digital in our upcoming report.