Protecting Consumers in the Era of Instant Payments
As instant payments become the norm, financial institutions face the challenge of balancing speed with security. Sujata Dasgupta, Global Head of Financial Crime Compliance Advisory at TCS, highlights the rapid evolution from traditional banking to 24/7 instant payments, which, while convenient, also opens doors for financial fraud.
The EU’s new regulation mandates instant euro payments within 10 seconds, 24/7, across the EU and EEA. This move aims to enhance convenience but also necessitates robust fraud prevention measures. Dasgupta emphasizes the importance of technologies like Confirmation of Payee (CoP) and multi-layered fraud detection models to safeguard consumers.
“Instant payments are a double-edged sword,” says Dasgupta. “While they offer unparalleled convenience, they also require advanced fraud detection mechanisms to protect consumers.”
Instant payments have disrupted the financial services ecosystem globally, with systems like the UK’s Faster Payments, India’s IMPS, and Brazil’s Pix leading the way. However, the rapid transaction speed also means that fraudulent payments can be executed and moved across accounts within seconds, making recovery nearly impossible.
To combat this, financial institutions are adopting advanced technologies such as behavioral biometrics and machine learning models. These tools can detect anomalies in user behavior and transaction patterns, helping to prevent fraud before it occurs. Additionally, the UK’s upcoming PSR3 regulation will require both sending and receiving banks to monitor for fraud, marking a significant shift in liability and encouraging more comprehensive fraud detection practices.
As instant payments continue to expand, collaboration between banks and regulators will be crucial in developing uniform standards and best practices for fraud prevention. This proactive approach will help ensure that the benefits of instant payments are not overshadowed by the risks of financial crime.
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