Cut Your Losses

Over the last decade, P2P and A2A payments have become essential offerings for FIs. How essential? According to Forbes, account transfer volume reached $1.4 trillion in 2023, up 28.5% from 2022, and is predicted to climb to $2.3 trillion annually by 2026. Account transfers are also slated to be popular use cases for FedNow and RTP instant payment services. But where there’s smoke, there’s also fire. Or, in this case, arsonists.

The uptick in account transfer services rang the dinner bell for fraudsters. $1.7 billion in losses were reported in 2022, an increase of 90% over 2021 (Forbes). Simply put, if you’re an FI, identifying, preventing, and mitigating fraud is a constant challenge, pitting the integrity of your controls against the next-gen tactics of fraudsters. As such, your fraud prevention tool kit should include a combination of identification, prevention, and mitigation techniques.  Here are some of the best:

Identification Sound Practices

• Monitor online/app session characteristics to flag unusual activity.
• Require out-of-band authentication and notification for all account holder contact changes.
• Threat intelligence – keep up to date with types of schemes used by fraudsters.

Prevention Sound Practices

• External account ownership validation (i.e., micro-entries, voided checks, etc.)
• Send recurring reminders to account holders of what constitutes risky behavior.
• Enable accountholders to disable transfer services from online banking.

Mitigation Sound Practices

• Establish dollar and/or velocity limits, especially for new accounts.
• Documented policies for resolving fraud claims for regulatory compliance and consistent account holder experience.

As long as account transfer services keep growing, fraudsters will look for ways to infiltrate them. Luckily, you’ve got sound practices to keep them out, and that help you Level Up.

Got a question about anything above? Let us know!