The Federal Reserve’s FedNow® Service has arrived, joining The Clearing House’s (TCH) real-time payments platform (RTP®) in a watershed moment for the U.S. financial industry. Together, these platforms have launched America into a faster payments era — defined on one side by unprecedented speed and customer convenience, and the other by an increased demand for greater vigilance against fraud while minimizing customer friction. The pressure on fraud prevention programs and potential for reputational risk is significant as financial institutions rush to adopt America’s latest payment rail and meet customer expectations.
In this time of rapid change, our experts have identified the two essential considerations to future proof your fraud prevention program and adopt the FedNow® Service with confidence.
1. Keep Pace with Real-Time Analysis & Interdiction
“With instant payments’ speed and finality, it’s particularly important to detect nefarious activity as early as possible in the payment flow.”
– The Federal Reserve
FedNow® Service payments are fast and final. They are irrevocable, settle instantly, and up to $500K can be sent in a single transfer. With an extremely narrow window to detect suspicious activity, losses can be significant unless your institution takes immediate action against fraudulent activity. A financial crime management solution that provides real-time analysis and interdiction strategies will allow your institution to release or reject a FedNow® Service payment at the earliest opportunity — a crucial layer of protection for your customers and your institution.
2. Harness Holistic Insights with Consortium Analytics
Authorized Push Payment (APP) fraud is a major challenge in the financial industry, responsible for billions of dollars in losses. Through social engineering, victims are persuaded into transferring funds to a fraudster posing as a genuine payee. According to the Federal Reserve, the speed and irrevocable nature of FedNow® Service payments could make detection and prevention of APP, and similar fraud scenarios, highly challenging:
“When the bad actor is the payee, these characteristics make it more challenging to detect and stop payment on a fraudulent instant payment transaction before the bad actor has already withdrawn the funds.”
– The Federal Reserve
As recommended by the Federal Reserve, a holistic approach is crucial to combating real-time payments fraud. A financial crime management platform that leverages the power of consortium analytics can help your institution consider the complete picture of risk across the entirety of a FedNow® Service or other real-time payment transaction.
In a consortium analytics approach, payments involving known safe accounts are analyzed as lower risk, while payments involving new or unrecognized accounts are analyzed as higher risk. This allows your institution to review potentially suspicious payments and permit legitimate transfers to proceed uninterrupted.
Adopt The FedNow® Service with Confidence
Real-time payments platforms such as the FedNow® Service provide significant opportunities for financial institutions, from increased customer convenience to greater payment transparency. They also create an accelerated vector for fraud. To adopt these new channels with confidence, financial institutions need an effective, holistic fraud solution that provides insight into the risk of payments beyond their four walls.
At Verafin, our Real-time Payments Fraud solution for the FedNow® Service uses a consortium approach to leverage insights from 2400 financial institutions and over 400 million profiled accounts to enable comprehensive insight into FedNow® Service payment risk, without sharing Personally Identifiable Information (PII). Through the collective power of the Verafin network combined with real-time analysis and interdiction, you gain the ability to effectively identify and interdict on potentially suspicious FedNow® Service payments before the funds leave your institution, while permitting legitimate transfers to proceed uninterrupted. The result is added confidence for your fraud prevention program with a solution that also helps your institution maintain the speed and convenience customers will expect from the FedNow® Service as a real-time payment rail.
For more information on our consortium approach to real-time payments fraud detection for the FedNow® Service, visit our Faster Payments Fraud Detection solution page.