No Buffer Time for Suspicion

In traditional transactions, there was usually a buffer period during which suspicious payments could be intervened upon. For example, check transactions might take several days to clear with multiple institutions involved capable of halting the payment if something seemed off.

With real-time payments, this buffer no longer exists. Once a payment is sent, it proceeds without delay. Banks can still dispute or reimburse customers later but they lack the ability to stop the transaction before it settles.

Consumers now expect faster transactions, but this has led to concerns over security and friction. Historically, some real-time payment services like Zelle and Cash App prioritized speed over security measures. However, they have since adjusted their protocols to bolster fraud protection.

Identifying Fraud Early

To combat potential fraud in real-time transactions, financial institutions must analyze data points such as device intelligence, account activity patterns, and user behavior. These include checking if the device is being used differently than usual or logging from an unfamiliar location. Such early detection can prevent fraudulent payments before they occur.

Ensuring Authentication

Authentication steps are necessary but can introduce inconvenience for users. Technologies like passkeys and biometrics offer seamless alternatives to multi-step verification processes that require switching between devices and apps.

If a user’s behavior signals increased risk, financial institutions might implement additional authentication measures. For instance, if an account holder usually logs in from Switzerland yet one day does it from Taiwan, they could be asked for further verification to confirm their identity and the legitimacy of the new location.

Adapting to Criminal Tactics

While banks face regulatory constraints that criminals sidestep, advanced AI tools can help financial institutions stay abreast of evolving fraud tactics. However, simply addressing immediate threats ignores potential future vulnerabilities.

For example, mobile check deposit fraud could have been anticipated and prevented long ago as the industry transitioned from physical checks to digital ones. Banks need to consider a broader spectrum of potential risks in their fraud detection strategies.

Optimizing Resource Allocation

Manual reviews often generate excessive alerts with high false positives rates—forcing human teams to spend valuable time investigating benign activity rather than focusing on genuine threats. Implementing technology that filters these routine alerts more accurately allows for a more effective deployment of resources towards critical investigations.