Our Experts and FinTech Veterans Dispute Real-Time Money Movement’s Fraud Myths
At FinTech Meetup last week, we sat in on conversations around real-time money movement (RTMM), hearing industry experts’ thoughts on the subjects we’ve been discussing in our RTMM guidebook, webinars, and blogs. In their session “Ubiquitous Real-Time Payments: Implications, Opportunities & Risks”, Mark Gould, Chief Payments Officer at Federal Reserve Financial Services; Stephany Kirkpatrick, CEO at Orum (a payment processor actively leveraging FedNow’s real-time rails); David Watson, President & CEO at The Clearing House; and Jane Larimer, President & CEO at Nacha (the independent organization that operates the Automated Clearing House (ACH) network) sat down to recap the changes the industry has been feeling in fraud across the RTMM landscape.
In our real-time money movement guidebook, we debunked three myths that are holding back FIs from capitalizing on the growth of real-time payment systems. Mark, Stephany, David, and Jane touched on the same myths during their discussion, adding insights from the frontlines of RTMM’s rise. Here is a compilation of insights on the challenges of today and tomorrow, from the NeuroID solution provider view and industry experts’ perspectives.
Challenge #1: Real-Time Payments Are More Vulnerable to Fraud
What NeuroID experts said: Real-time payments are intimidating: they’re instant, they’re irrevocable, and they’re a new development that has forced fraud professionals to rethink their approach to payments. The fear surrounding RTMM may be rooted in unfamiliarity rather than reality, but institutions must still implement modern, effective solutions to keep pace with evolving fraud tactics.
“As the doors are closing on some kinds of fraud, that squeezes the fraudsters to other kinds of fraud,” said David Liu, consultant and fraud leader. “Real-time payments involve mostly push payment fraud, which means that traditional kinds of transaction fraud aren’t relevant.
What Independent Experts said at FinTech Meetup: “When Uber launched, the unknowns around safety were offputting. Having a stranger pick you up at your home address seemed astronomically insurmountable. Yet here we are, it is literally a part of our lives,” said Stephany. “I think the innovation that’s coming to push payment and risk management within account-to-account transfers is similar.”
Fraud is certainly present in real-time payments, though, and stopping it requires the right solutions and strategies. Consumers are eager to use RTMM when receiving wages and paying bills; institutions must meet consumers’ needs for those use cases but, in others, can continue to lean on ACH and relieve pressure on their RTMM infrastructure.
The Bottom Line: “It goes to the end user. What does the end user want? Does this money need to be there in 30 seconds, or can it be there in 3 hours? Do you want irrevocability or not?,” said Jane. “As we look at those things, it’s about allowing the end user to know that there are different attributes around those payments and meeting their needs for their circumstances.”
In NeuroID’s research, we’ve found that over two-thirds of Gen Z use digital wallets almost exclusively. The demand is there–it’s up to providers to decide how to meet it.
Challenge #2: Americans’ Appetite for Real-Time Money Movements is Slow
What NeuroID experts said: The U.S. has lagged behind the rest of the world in RTMM, but consumers’ desire for faster, more secure payments is tangible. Especially as FedNow has sped up adoption, real-time payment rails in the U.S. have seen an influx of users seeking speed and convenience—75% of consumers are already using faster payment methods.
What Independent Experts said at FinTech Meetup: “Clearing House RTP has been a huge success and it continues to be accelerated by the launch of FedNow,” said Watson. “There is a time and a place for ACH, cards, and checks, but none of those have the ability of real-time payments. It really is the foundation of the future of payments.”
The advantages of RTMM make it a major draw for both senders and receivers looking for more control over their transactions. As it becomes more accessible, consumers will rely on it whenever they want their money faster.
The Bottom Line: “Any time that speed, finality, and convenience really matter, people are going to choose instant payments,” said Mark. “The real trick is getting everybody in the economy aware of it as an alternative so that they can make the right choice for them.”
Consumers’ desire for RTMM systems has outpaced financial institutions’ willingness to adopt them. FIs must embrace RTMM to satisfy the nearly 80% of consumers who want to make payments to businesses faster and more directly.
Challenge #3: Businesses Can’t Wait-and-See Before Taking on Real-Time Payments
What NeuroID experts said: RTMM’s growth has caught businesses off-guard—it’s the first major shakeup to payments in decades. The tried-and-true solutions that businesses have relied on are falling short, and RTMM has sparked the need for new solutions.
What Independent Experts said at FinTech Meetup: “With Nacha and ACH being 50 years old, you can imagine that most, if not all, financial systems banks in the U.S. have been on a technology system that didn’t need substantial innovation until our attempting to cut net came along,” said Stephany.
The Bottom Line: If businesses hesitate to adopt RTMM, its full potential will only take longer to realize. Real-time payments are on track to become a staple of how consumers send and receive money— real-time transactions in the U.S. are on track to triple by 2026—and businesses could miss out on billions by waiting to embrace them.
“I encourage everyone to continue to think about the opportunity to innovate and not to say, ‘ let’s not use instant payments until it’s all figured out’,” said Stephany. “If we do that, we will never build the incredible outcomes.”
Where Does Real-Time Go From Here?
At the tail end of 2023, real-time money movement was the big talk of every event we attended. That enthusiasm and uncertainty has carried over to 2024, and while the rise of FedNow and other real-time payment systems has been in line with our expectations for RTMM’s growth, many financial institutions and fraud professionals are still uncovering its implications.
Throughout 2024, real-time money movement will continue to be a top talking point at trade shows, within companies, and among consumers looking for seamless, secure instant payment methods. To stay ahead of the conversations and learn more about the myths and realities of real-time money movement, read our guidebook 3 Common Myths About Real-Time Money Movement and Fraud.
Some quotes have been lightly edited for clarity and context.
