Before you blindly proceed with a payment, no matter what the channel, take a minute to think about it carefully.
If there is an unnatural sense of urgency on someone’s part to receive money, take a moment and ask yourself if someone is cheating you.
When I reflect on 2022, I can’t predict much of what might happen in 2023. Also, my forecasting skills aren’t the best. I will give you two examples. First, I thought my two favorite baseball teams would have a great season, and I felt like I was on the right track. But the San Francisco Padres (my current team) lost to the Phillies; and the Yankees (my lifelong team) were beaten by the Astros and I kept waiting to see them in the World Series.
For every story about real-time payments that is successful and makes life easier for people who send money to others out of necessity, there seems to be a parallel story about fraud. Financial institutions (FIs) are not letting fraud trends go unnoticed, and customers are becoming increasingly aware of this problem, so both banks and customers are eager to mitigate it as much as possible. FIs are in a good position to use the resources necessary to have where to make immediate and long-term impacts.
Using digital payments to combat fraud
As we are in the early stages of many new payment technologies, the steps FIs take in 2023 will shape these new payment markets. Below, I have listed my predictions about payment trends for this new year, how they will generate risks or opportunities, and why FIs should be aware of each one of them.
Data obtained from the Bank of America semi-annual report showed growth in all forms of digital and electronic payments. Although debit transactions are prevalent, all other payment types are growing rapidly. Credit cards have seen record growth and near-record balances through 2022, and alternative payment methods are booming, from real-time money and interbank transfers to smartphone-based systems like Apple Pay and Google Pay.
What scammers will take advantage of here is a wide variety of payment options that offer a way to take money directly from consumers, and which change in popularity with social media trends. Scammers can hide in plain sight and use social engineering to directly contact consumers to force them to make immediate and irreversible payments. As FIs have more customers using more forms of digital payments, defending against the overwhelming array of scams will be critical to the customer experience, and potentially required for regulatory compliance.
The “Buy now, pay later” method will be positive for the customer experience, although it will need much more security
The use of “buy now, pay later” is starting to be a massive method, with approximately 60 million users today. It continues to grow not only because of the explosion of e-commerce during the pandemic, but also because some merchants have offered it because it has become easier to connect to an e-commerce site.
There will be no end to the P2P app fraud crisis: One of the big questions in Washington in 2022, and among compliance officers around the world, was whether lawmakers and regulators would agree that banks should be held accountable for fraud. fraud in P2P (person-to-person) applications, even if the customers were deceived and the technology was not “hacked”. To the bad luck of the FIs, none of the problem (of those mentioned above) will disappear in the future.
FIs can do themselves a favor, when it is still possible in the liability debate to add some of the sensitive discussions in the payment process. Real-time, authentication-based, behavioral controls that are simple and effective can help prevent customers from being misled. Given the regulatory environment in 2022, FIs can expect more intervention in 2023, even though they are taking steps to stay ahead of legislators.
However, the easier it is to pay, the more scammers will find ways to shut down the transfer and payment processes. This brings vendor spoofing and business identity theft into the digital age. FIs should consider training customers on how to defend their own payment processes against scams from impostors and business emails, as well as ensure the trust, security and authenticity of ACH transactions.
We will not have to apologize for not bringing cash: It is said that the demise of cash is an exaggeration, but it may not be so. UK Finance says that although people in Britain are withdrawing more cash than ever before, the use of cash will fall by 15% per year or more due to digital payments.
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