Real-time Payments Have Arrived

Real-time payments have existed in some other countries for several years, and they are now a reality in the United States. Many financial institutions (FIs) are offering their customers the ability to send money in real time to family and friends quickly and easily and, in many cases, without a charge. New payment types are evolving—business-to-business payments as well as person-to-business payments, business-to-person (B2P) payments, and person-to-person (P2P) payments are becoming mainstream.

Additional FIs are actively evaluating the market demand and deciding whether to offer real-time payments to their customers.

Consumers have developed a love affair with their mobile devices, and they want to use them to make their lives easier and more efficient. Banking, making purchases, and moving money are all key to easily managing finances. Demand for real-time payments is strong; if FIs don’t meet the demand, other market players certainly will.

Many FIs are focused on improving the customer experience to retain existing customers and win new ones. This is manifesting as simpler authentication methods, streamlined dispute processes, and the development of new products and services in the mobile channel first. With the acceleration of payments and increased risk, it is imperative for FIs to be ready to support faster payments and real-time payments. Many FIs are considering offering a real-time product to stay competitive in the market, and fraud executives must form strategies and implement appropriate processes prior to the FI offering these payments. Being able to offer consumers a method of moving money in real time using their mobile device is a service that many FIs are actively implementing or evaluating.

One impediment to offering real-time money movement is the fear that doing so will increase the speed of fraud. Fraud executives may not understand what steps they need to take to adequately prepare to support real-time payments, and they are concerned that management may move forward before they are able to detect and prevent the fraud that may result. Technology investments may be necessary to ensure the customer experience is a good one while offering real-time payments and managing fraud levels effectively.

Authentication is the foundation of fraud prevention.  As FIs offer real-time payments, one of the strongest control points must be at the point of registering customers to use the product. FIs can use stepped-up authentication to ensure their legitimate customer is the one registering, and they should perform similar measures when originating a payment to a specific payee for the first time. Stepped-up authentication measures should be built into the process, such as requiring a one-time passcode be received and entered before a transaction is sent. Additional security measures are also important, such as verifying the device being used is associated with the customer and using mobile network operator data to ensure the SIM card on the phone hasn’t been switched or the mobile number hasn’t been forwarded.

Payments will continue to evolve to meet market demands. Some nonprofit organizations and corporations are already using real-time payments to disburse funds to consumers. As real-time payments volume increases, and as more people experience the benefits, demand will grow even faster. Understanding the fraud implications and being ready to mitigate fraud successfully in real time is essential to meeting market demand, managing fraud losses effectively, and providing a superior customer experience in the process. Having real-time security to protect these payments is paramount to ensuring a positive customer experience while also mitigating fraud losses.

Ready to learn more?

Join Early Warning’s director of market solutions for payments, Ryan Riveland, and me as we discuss current market trends impacting the strategies that large FIs are developing to protect digital channels against fraud. Join Early Warning and I as we discuss current market trends in real-time money movement and the trends that are impacting the strategies that FIs are developing to protect digital channels against fraud.

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