Banks Need to Protect Consumers from Rising Levels of Payments Fraud

As contactless and digital payments become increasingly dominant, a corresponding level of fraud risk must also be taken into account.

Jay Floyd, Senior Principal Financial Crime Consultant at ACI Worldwide, offers Finance Monthly his thoughts on how banks can keep pace with payments innovation to better protect consumers.

Contactless and digital payments have without doubt grown in popularity during the last year, accelerated by the COVID-19 pandemic and consumers trying to avoid using cash to reduce the spread of the virus. As a consequence, the contactless limit in the UK has recently been increased to £100. While a welcome move for both consumers and the payments ecosystem, this increase comes with the inherent risk of more fraud.

It means a consumer with four debit cards on them now carries a minimum of £400 worth of payments without a PIN, rather than the current £180. This figure is actually likely to be higher, given issuers typically allow five consecutive transactions to be made before a PIN is requested. In this example, that could be up to £2,000 worth of payments. This means your leather wallet is now worth a lot more to a thief than before the limit rise.

As we face one of the worst economic challenges since the 2008 financial crash, banks need to make sure their fraud protection measures are up to scratch. And there needs to be greater consumer education about the risk of making a payment which many now view as a simple ‘tap and don’t think’ action.

Contactless paves road for payments innovation 

Today’s consumers want access to fast and seamless payment experiences. In my view, contactless payments and the increase in limits will pave the way for greater payments innovation in the years to come.

For the broader payment landscape, it’s real-time payments that are leading the way for increased innovation and the growing adoption of different payment technologies – such as QR codes for payments and digital wallets.

Today’s consumers want access to fast and seamless payment experiences.

However, new payments methods and processes always present new opportunities for crime. The recent increase in real-time payment transactions in the UK has sparked an increase in fraudulent activity. UK Finance recently reported that in the first half of 2020, £207.8 million was lost to Authorised Push Payment fraud, with financial institutions only able to return £73.1 million of losses to victims.

The pandemic has further accelerated our move towards a more digital world. While the number of physical bank branches had been declining for some time, recent announcements highlight a rapid acceleration in the closure of bank branches since lockdown. During this process, criminals have adapted their methods of committing fraud, taking advantage of the rising use of contactless and real-time payments. With the adoption rate showing no signs of slowing down, banks need to adapt to the changing landscape and equip themselves with the right measures to protect customers from fraud.

Real-time fraud management solutions will increase fraud detection

Effective fraud prevention requires solutions that can detect all possible types of fraud, across all channels. Real-time payments for example track every step of the transaction processing lifecycle instantly. The good news for banks is this means fraud detection can be instant too.

Through real-time fraud management solutions, banks can increase fraud detection accuracy with advanced machine learning (ML) models to make better informed and faster decisions. It also ensures banks can be confident in remaining compliant with all fraud regulations – such as PSD2 and Anti Money Laundering directives – while delivering the ultimate customer experience.

Combining real-time payments data with ML, network intelligence and community fraud signals, fraud teams can detect fraud to improve overall fraud prevention rates at a much faster pace. Real-time fraud prevention solutions can perform millions of fraud checks within seconds and continuously learn from the data to become more accurate and effective over time.

Avoiding the financial crime of tomorrow

Fraud trends are moving fast and ultimately fraudsters will always find new ways to make money illegally. While banks have put in place numerous fraud prevention measures since the start of the pandemic, spending habits will continue to change, and they must be prepared to protect customers – and themselves – from the financial crime of tomorrow.

By taking advantage of the benefits of real-time payments technology, banks can put themselves in the best position to detect fraudulent activity and protect consumers and ultimately their reputation.

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