Real-time payments – mitigating the security risks to capitalise on the opportunities

By Shrey Rastogi, Senior Payments Strategist at Temenos

The payments industry is an increasingly competitive environment, with pressures mounting on incumbent banks to innovate at the same pace as digital, neobanks and new payment players, such as PayPal and AliPay, to meet customer expectations for digital payments services that fit ‘invisibly’ into their convenience-driven lifestyles.

Increasing digitalisation across banking is resulting in skyrocketing payments volumes and a heightened emphasis on real-time payments. New regulations such as Open Banking, instant payments schemes and standards like ISO 20022 migration are accelerating payments transformation and setting deadlines to ensure that banks are adapting their processes and systems for the digital era.

Despite the economic downturn, today’s Covid-19 pandemic is further accelerating digital payments adoption around the globe, as consumers and businesses are rapidly moving from cash and other paper payment instruments. Digital payments are also key to e-commerce which again is growing at fast pace due to lock-down restrictions and social distancing norms in place now.

However, as payments volumes increase, get faster and systems advance, fraudsters are also becoming more sophisticated and banks find themselves faced with a new and more challenging risk environment. Today’s fraudsters don’t only use well-honed techniques, like phishing and social engineering, but also authorised push payment frauds along with organised cyberattacks like Advanced Persistent Threats (APTs) and (distributed) Denial-of-Service (DoS).

While it’s true that regulations like GDPR, Strong Customer Authentication (SCA) and Confirmation of Payee aim to reduce payment fraud, prevention truly begins with modern payment solutions that can deliver increased security without adding friction to the customers’ payment journeys.

As such, banks must pursue payments platforms with embedded machine learning and AI, to enable better fraud detection while supporting seamless customer experiences. With payment transaction speeds increasing with instant payments, banks must be able to analyse payment traffic in real-time to detect and stop fraudulent transactions before completion.

There are many technologies that increase payments security, such as encryption, tokenisation, multi-factor authentication and the use of biometrics across the payment life-cycle – from payment initiation to completion. Next-generation payment solutions incorporate these features to deliver payments experiences to customers that are both real-time and secure.

With many banks still relying on legacy payments systems that fall short of customer expectations and cannot cope with modern security challenges, there has never been a better time to adopt modern, real-time payments solutions. For retail customers, the latest technology provides real-time access to funds and a better user experience; for corporates, it can mean better cash flow management and for banks, it supports client acquisition and retention.

These benefits are even more significant and valuable in light of today’s Covid-19 crisis.

With the right real-time payments solution and right software provider, banks can improve security and resilience across their business and support mission-critical digital payments at a time when the global demand has never been so high.