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Real-Time Payments: What’s Ahead, and How to Fight Fraud

“Do you Zelle?” It’s a question FICO’s fraud head honcho, TJ Horan, pondered back in 2016, when the nascent real-time person-to-person (P2P) payments service Zelle was relaunched by a small consortium of banks (see below). By 2020, TJ was teaching his parents how to Zelle, an adoption curve reflected in an astonishing growth statistic: 13% of consumers used Zelle in 2020, up from a mere 1% in 2017.

TJ Horan tweet on real-time payments

 

On the other hand, Zelle remains the smaller of the Big 3 of P2P payment vehicles; in mid-March 2021, Payments Journal additionally reported that in North America:

  • 54% of consumers have used PayPal within the past year, up from 47% in 2017.
  • The second most popular app, Venmo, was used by 14% of consumers in 2020.

As it happens, there’s a lot more happening in the real-time payments arena than just PayPal, Venmo and Zelle. Let’s take a look at the current trends, with a focus on the US, and how banks can better arm themselves to fight fraud in this rapidly growing payments channel.

COVID Has Given a Permanent Boost to Real-Time Payments?

With the world in lockdown for a large part of 2020, real-time payments surged. More than 70 billion real-time payments were processed worldwide last year—a year-over-year jump of 41%. This trend is expected to continue, with a global annual compound annual growth rate (CAGR) of nearly 24% predicted between 2020 and 2025.

Still, the US market lags in real-time payments size and adoption. In 2017 a study by Visa and Accenture sized the North American opportunity for real-time payments at $18.5T in addressable payment volume. Furthermore, Research and Markets forecasts that instant payments will comprise just one-fifth of total transactions in the US through 2024.

In contrast, as reported by FIS, India was the global leader in 2020, processing 41 million real-time payments transactions per day, at a growth rate of 213% year-over-year.

Real-Time Payments Are Poised for Significant Growth

The US real-time component may seem tiny, but that is exactly the point. The transaction “rails” are in place and ready to process imminently high volumes; the Clearing House’s RTP network, launched in 2017, reaches 60% of US DDA accounts and delivers real-time payments including:

  • B2B real-time transactions
  • P2P real-time transactions
  • Payroll
  • Request for pay (RfP) 

The Federal Reserve is a second key player. In August 2019 The Federal Reserve Board announced that the Federal Reserve banks were developing a real-time payments rail: FedNow. In January 2021 the Fed launched a FedNow pilot program consisting of more than 200 financial institutions and processors that will help support the development, testing, and adoption of FedNow, which is slated to go live in 2023.

How to Fight Real-Time Payments Fraud

In light of the coming surge in real-time payments, FICO customers can be assured that our team has been pondering fraud-fighting strategies for even longer than Zelle has been around. Here’s an excerpt from a recent blog on ACH fraud which, like real-time payments fraud, puts a holistic view of the customer front and center:


A Panoply of Inflows and Outflows

Not too many years ago, the only inflows and outflows on checking accounts were paper checks. Today, many consumers are hard-pressed to find a single cancelled personal check on their monthly statement. There are person-to-person payments via Venmo, Zelle, and a host of other services; payments via ApplePay, SamsungPay and more, as well as an increasing number of ACH transactions. From my mobile banking app, I can even initiate a wire transfer, which in days past was reserved for making large purchases (like a house) or sending money abroad.

My point is that checking accounts are now a mini clearing house for all manner of inflows and outflows. An ACH payment may be sent a validated account, but is that payment suspiciously out of pattern? Is the transaction genuine, or is the account owner falling victim to a scam? A fraud platform that offers a holistic view of customer activity — credit and debit card transactions, P2P payments, mobile and online payments, ACH transfers and wires — can deliver more comprehensive fraud protection, while affording customers the frictionless ease of zipping money around.


FICO® Falcon® X delivers the flexibility prescribed. The solution gives users the freedom to design, simulate, and implement new fraud and financial crime strategies without technical constraints. As a result, banks can confidently support all digital banking interactions across authentication, payments, and account maintenance while exceeding customer expectations. Falcon X gets banks started quickly in fighting real-time payments fraud with next-generation capabilities including:

  • Pre-mapped data integration for retail banking payments
  • Packaged real-time payments fraud ruleset
  • Workflows that include rules and machine learning orchestration

Whether fraud is caused by social engineering, phishing, scams or other sophisticated techniques, Falcon X delivers the nano-profiling and historical context needed to protect legitimate P2P real-time payments transactions against fraud, as well as account takeover associated with P2P transfers, mobile payments, ACH and wire transfers.

For a more wide-ranging discussion on options for all transaction participants to help prevent real time payments fraud, read Doug Clare’s blog, “Real-Time Payments and Fraud – What Can be Done?” Follow FICO’s Fraud Protection and Compliance group on LinkedIn, too.

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