Assistant financial system governor at the RBA Michele Bullock told an audience in Sydney that there’s a lot happening in the payments space as participants and platforms work to create seamless experiences.
However, when it comes to the New Payments Platform (NPP), there’s still work to be done to address fraud risks, she claimed.
“It has been noted that in a world of real-time payments, fraud can also be done in real time. Unlike the current system, where there is at least a few hours to review and halt a fraudulent payment, in a fast payment system the money can be expected to be gone,” Ms Bullock said.
“The risk isn’t new – it just happens faster,” she added, noting that the UK has had similar challenges.
Continuing, the assistant governor said there are a few ways the platform and participants are “attempting to address fraud risks”.
For example, banks have in-house fraud detection systems monitoring interbank transfers.
“These include such things as transaction limits, two-factor authentication and algorithms designed to identify suspicious transactions. These will continue to be in place with the NPP,” Ms Bullock said.
Whether these measures are robust enough to protect against non-NPP transactions is still up for debate, with the Commonwealth Bank under fire for failing to meet anti-money laundering and counter-terrorism financing compliance obligations.
According to AUSTRAC, the government body in charge of Australia’s financial intelligence, the bank allegedly failed to comply with its internal anti-money laundering and counter-terrorism financing program, failed to report suspicious incidents and didn’t continue to monitor customers following suspected laundering efforts.
Additionally, Ms Bullock continued, the NPP will feature a PayID in which the sender will be shown the name of the account they’re paying into and confirm that they want to make the payment.
“This is an extra step that will assist payers to make sure they are paying who they think they are,” she said.
“There are also verification processes in place for registering PayIDs (the system that allows customers to assign an alias to their bank account) to ensure people are who they say they are.
“Indeed, PayID registration can only take place from within a customer’s internet banking portal or app.”
On top of this, the NPP has a fraud liability framework that will allocate liability where fraud occurs as a result of poor verification practices. This framework is in line with existing consumer protection frameworks.
“Like all payment systems, customers need to be alert to the potential for fraudsters to trick them out of details that would allow a fraud to occur – like their passwords. Educating consumers on these risks remains an imperative for the regulators and for the financial institutions,” Ms Bullock said.
Concluding, Ms Bullock urged industry participants to embrace the platform, calling it a critical piece of infrastructure in the path towards future payments innovation.
“It has taken many years of hard work from the industry, undertaken in a great spirit of co-operation. But we now have a world-class fast payments system that I encourage the industry to embrace and create valuable services for their customers,” she said.
Originally published in My Business’ sister publication Nest Egg.