Instant Payments Mean Real-Time Payments Fraud

Real-time payment schemes have exploded in recent years, with most major economies having their own payment scheme. For example, there is UPI in India, PIX in Brazil, and Faster Payments in the UK.

Real-time payments schemes are not new – indeed Japan has had a scheme since 1973 and Switzerland was the first European scheme in 1987. But the global adoption and rapid growth of such schemes, alongside the problems suffered by early adopters, has shifted the focus to real-time payments fraud.

Real-Time Payments Equal Real-Time Crime

The ability to send money quickly makes financial crime both easier to commit and more difficult to trace. Real-time payments make multiple types of fraud more attractive and enable the fast movement and laundering of criminal proceeds. The real-time payments fraud experiences of countries such as the UK provide a lesson to more recent schemes of what can happen to fraud rates when money can be transmitted quickly.

Increased awareness of fraud implications is coupled with higher values that can be transferred using these mechanisms. In the UK, £250K can now be sent in a single, irrevocable payment – and the system has been tested for up to an eyewatering £10 million. In Europe, SEPA CT Inst currently stands at a more modest €15K but is expected to increase. Individual banks can set their own limits below this, but even those with lower limits allow people to send - and potentially lose - life-changing amounts.

Fraud Using Real-Time Payments will Impact Businesses

Countries that are recent adopters of real-time payments introduce an additional factor to the fraud landscape. Newer schemes use the ISO2022XML messaging framework, which allows for additional information to be sent with the payment details. This is important because it makes these schemes more usable for B2B payments in a way that older schemes, such as UK Faster Payments, aren’t yet.

This raises the prospect of increased real-time payments fraud against businesses. We’ve already seen the impact of authorized push payment fraud (APP fraud) on businesses, even when payments are not cleared the same day. Losses have continued to sky rocket as criminals take advantage of the irrevocable nature of real-time payments.

Who Is Liable?

Nearly a decade ago, Which?, a UK consumer protection group, began championing for protection for victims of APP fraud. After some initial strategies such as the Contingent Reimbursement Model (CRM), the Payment Systems Regulator introduced the APP fraud reimbursement protection on 7 October 2024. Since then, 88% of APP losses have been reimbursed to victims.

The issue of liability still needs to play out in other geographies, and it’s likely that different geographies will take different stances on exactly where liability sits. As I previously reported, markets such as Australia and Singapore are also extending liability beyond financial institutions to include organizations that are also viewed as having responsibility for scams such as telecommunications providers and social media companies.

Regardless of where legal liability ends up, there are compelling reasons why banks need to address fraud in real-time payments now, including:

• Protecting their customers from losses to improve customer experience and avoid attrition.
• Protecting their reputation – managing this kind of fraud could become a competitive advantage.
• Avoiding regulatory action – being proactive could help prevent new regulations that are likely to be difficult and expensive to manage.

Taking a Holistic Approach to Real-Time Payments Fraud

Real-time payments feed a complex fraud ecosystem, driving other fraud types including account takeover fraud, application fraud, and money-laundering.  Banks that take a more holistic approach to fraud prevention, one that works across channels, payment mechanisms, and the customer lifecycle, will be better equipped to protect their organizations and their customers.

How FICO Can Help You Prevent Real-Time Payments Fraud

• Understand more about modern approaches to enterprise fraud with the six E’s of enterprise fraud
• Read the Datos Insights analyst paper: Beyond point Solutions, orchestrating the future of fraud prevention
• Explore FICO fraud solutions

This is an update of a post from 2018.