Technology has advanced so much that a Cablegate scandal spread like wildfire way back in 2010. Today with advanced technology in your hand you can do a whole lot of things besides keeping up to date with the latest scandals; you can make purchases any time of the day, book vacations, talk across the globe and even order food from the comfort of your house. Today it is possible to see in real time what your account balance is after every transaction.
Probably that is what motivated the National Automated Clearing House Association ( NACHA) to issue a directive that addresses the need for real-time or faster payment systems. But this not-for-profit association did not realize the disadvantage of this move and the operational risks thereof.
What are the risks?
Since there are so may internal processes, systems and people involved there is a risk of loss of financial information if any of these links breakdowns or is faulty. All the respective institutions must be able to meet the new requirement by changing the existing policies, processes and risk factors.
- The prevalence of account takeover and fraud are the biggest risks associated with faster clearances.
- Account takeovers: Malicious software, remote access Trojans, and phishing scams will increase and hackers will be able to withdraw money from your HBSwiss account without your knowing it. These are called account takeover attacks.
- Human or bot: Today, it is paramount to know if you are dealing with a human or a bot and if you are the person you claim to be to prevent fraud. With the emphasis on speed, banks, and financial institutes often find themselves inadequate to identify the true account holder.
- Inadequate security protocols: Risk management, corporate governance, internal audits and other compliance programs are the key to run a business efficiently. When you increase the speed of transactions, the time spent on reviewing suspicious activity reduces. To combat this risk all the financial institutes must update their security protocol and measures, and fraud detection systems. The updated security measures must detect frauds immediately and give real-time validation with a minimum margin of error.
- Appropriate technology: In the absence of appropriate technology that instantaneously detects fraudulent transaction, the customer, the merchant and the bank are at risk.
Why will faster payment make you more vulnerable?
Banks have to be constantly on the lookout for fraud associated with online banking, checks, false claims and First party frauds. The vulnerability of the system makes the perpetrator get in and out quickly giving very little time for the security system to detect fraudulent practice.
If you do several online transactions a day, then you are exposing yourself to greater risk.
Risks should not be a deterrent to pace
Online payment is synonymous with risks. To be competitive faster payments are a must as they shorten the clearing time and ensure that all financial transactions end by a stipulated time.
It is a constant struggle to stay ahead of fraudsters who always seem to come up with new ways to exploit vulnerabilities associated with faster clearances.
Institutes should look at real-time fraud indicators that can help them determine a fraudulent account from a genuine one and authenticating procedures to prevent these risks from stopping growth and development.