The Convenience Of Instant Payments Is Not Without Risk

March 20, 2024

RS2, a global digital banking infrastructure firm, recently revealed that instant schemes in Asia and Europe are working together to help accelerate the economic growth between countries.

RS2 published a white paper detailing the fast adoption rates of instant payments across the globe, predicting that by the year 2029, one in three consumer payments will be instant and by 2027, 30% of all digital European transactions will be instant.

In Europe and North America, Account-to-Account (A2A) payments have experienced strong growth through API connectivity between banks, while new payment types such as request to pay (R2P) – in which companies are permissioned to take instant debit payments from consumer accounts – are also forging ahead.

This raises concern, however, as Instant Payments are at a greater transaction risk. The amount of time between the money leaving the payee account and settlement is minimal, and therefore KYC and AML routines are more challenging.

The white paper states Authorized Push Payments (APPs) as one of the problematic examples of the new risks instant payments can generate. APPs allow customers to authorize instant payments to a company of their choice, which can be a boon. However, APP fraud has risen through the roof in recent years, it now accounts for 75% of all digital payments fraud, and is set to surpass $5.25 billion by 2026 in the US, UK and India.

Other particularly risky fraud types in instant payments are Account Takeover and Synthetic ID precisely because the transfer of funds and liability happen immediately.

Payments Cards and Mobile’s white paper titled Why banks Must Prepare for an Instant Future explains the steps banks should take to prepare for a future where cross-border and digital payments are the main players in payments.

(…) the white paper considers long-standing and emerging challenges faced by banking technology, from legacy systems that are expensive to maintain through to operational challenges such as the provision of liquidity for instant settlement, managing high-volume, multi-currency transactions, compliance, regulation and more

Fraud is rife in any payment scheme, but unfortunately, instant payments might be at higher risk because of the instant feature. There’s not enough time to check if a payment is legit, and fighting a settlement might be trickier because of it. Banks must be prepared for any case scenario. 

Want to learn more? Check out Payments Cards and Mobile’s full write-up here.

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