“We must accept human error as inevitable – and design around that fact.” Although the previous statement originated from an official in the medical industry, it has significant application to credit unions when it comes to payments fraud. We may be our own worst enemy.
Human exploitation, lost/stolen credentials or scams that compel consumers to divulge or expose personal information keep payments fraud on the rise. Fraud via lost and/or stolen credentials alone increased nearly 80% over 2020, according to a 2022 Identity Fraud Study from Javelin Strategy & Research. With the addition of scam-related fraud, losses totaled $52 billion and affected 42 million U.S. adults.
Those numbers are staggering, but not shocking, since technology keeps advancing. In 2021, the Faster Payments Council (FPC) conducted a fraud survey that revealed comparable findings. Survey respondents included financial institutions, businesses, consumer-based organizations, technology providers and others. The FPC’s report concluded that half the respondents experienced faster payments fraud, with 45% of those reporting account takeover/social engineering fraud where consumers were tricked into revealing account credentials. Combined with other types of scams, more than 70% of responding organizations fell victim to fraud due to the manipulation of consumers.
“Humans continue to be a weak point in the payments ecosystem,” the report noted. This type of fraud is not only impacting the payments system, but also having real consequences for consumers. The fallout from payments fraud can be significant, including the need to create new credentials and financial loss.
We must continue to raise awareness about payments fraud and how consumers are being targeted. The 2021 Faster Payments Fraud Survey and Report helps do just that. This valuable resource explains that industry participants have measures in place, and they are enhancing them with new technology controls to address faster payments fraud and more sophisticated scams. In fact, about half of the respondents reported adoption of new faster payments technology to complement those used for traditional payment methods. Of those that implemented new controls:
As consumers in this ever-evolving market, we can fall victim to fraud. Remember? Human error is inevitable. However, we don’t have to be our own worst enemy. With continued education, resources and enhanced, innovative mitigation efforts by payments ecosystem stakeholders, we can reduce this type of payments fraud.
If you have not started, it’s time to develop a strategic faster payments plan, and Catalyst Corporate can help. For more information about person-to-person payments, The Clearing House Real-Time Payments or the FedNow℠ Service, contact us today.
As Vice President – Payments Products & Innovations at Catalyst Corporate, Glenn oversees item processing operations, including share draft, deposit and return item processing.
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