In a world where payments move in milliseconds, why are we still relying on downstream controls?
In my experience across fraud prevention and payment operations, I’ve often observed that a critical control point is being overlooked in current fraud strategies: the narrow window between payment authorization and payment message creation.
Today, most fraud prevention controls are implemented too far downstream. However, payment authorization, the point at which a financial institution internally approves a transaction request, marks the beginning of a short but vital window. By implementing controls specifically within the process between authorization and message creation, institutions can detect and prevent fraudulent activity before funds are irrevocably committed.
The reactive approach, which is ignoring fraud until later in the payment lifecycle, places unnecessary pressure on downstream systems. When detection is deferred, fraud systems must analyze a greater volume of transactions, both legitimate and suspicious, within tight timeframes. This can lead to performance degradation and missed fraud signals.
Shifting fraud detection earlier in the process, before the payment message is created, not only strengthens fraud defenses, but also reduces system load, improves throughput, and supports compliance with real-time processing standards.
Intercepting Fraud Between Authorization and Execution
Fraud in 2025 is precise, fast, and increasingly coordinated. In outbound payment scenarios, where funds exit the institution within seconds, delayed detection is no longer viable.
From my experience, the most effective strategies focus on threats like Authorized Push Payment (APP) scams and Account Takeover (ATO) attempts during the critical window before payment message creation. APP fraud hinges on deception, tricking users into authorizing payments they believe are legitimate. ATO involves fraudsters hijacking legitimate accounts to initiate payments using stolen credentials. In both cases, the transaction is authorized through legitimate channels, making fraud controls that activate after message creation or settlement too late to be effective.
Detecting fraud earlier prevents high-risk transactions from entering orchestration, preserving system integrity, and minimizing downstream disruption.
Pinpointing the Pre-Message Control Window
Fraud controls should be applied both before and after authorization, but most critically, before message orchestration begins. Orchestration refers to the system-driven process of assembling payment data for external routing, such as through SEPA, CHAPS, Swift, or Fedwire.
This window enables institutions to detect fraud signals in real-time, intercept suspicious transactions, and ensure legitimate payments proceed without delay. Institutions that implement pre-message defense checkpoints achieve two critical outcomes: they block fraud before orchestration and clearing, and they align with regulatory expectations for early intervention and shared liability, such as those mandated under the UK’s APP fraud reimbursement rules effective from October 2024.
Strategic Enablers of Pre-Message Defense
The call to intercept fraud before payment messages are finalized is not simply a practitioner’s perspective. It is a stance reflected in regulatory mandates and industry guidance:
- UK: The Payment Systems Regulator (PSR) introduced a mandatory reimbursement framework for APP scams, effective from October 2024, emphasizing the need for stronger upstream protections and earlier intervention, specifically controls that act immediately after authorization and before funds are irrevocably committed.
- EU: The European Payments Council’s 2024 Payment Threats and Fraud Trends Report urges institutions to adopt controls at the earliest stages of payment processing, highlighting the value of behavioral and contextual analytics to detect fraud well before message finalization.
- US: The Federal Reserve’s FedNow Explorer outlines a Fraud Control Tower model that places detection before payment finality, instructing institutions to block suspicious transactions before the funds leave the bank, thereby enabling real-time fraud prevention at the orchestration point.
While ISO 20022 is widely recognized for enabling enhanced fraud detection through richer and more structured payment data, its effectiveness in the pre-message stage depends on how early institutions apply its data models internally. When leveraged at this stage, ISO 20022 can improve the accuracy of anomaly detection and support timelier, risk-based, real-time decisioning.
Tactical Enablers for Early Detection: Building a Layered Defense
Each control outlined supports a broader tactical strategy designed to align Fraud and Compliance obligations as early as possible in the payment lifecycle. Together, they form a layered defense model that enables institutions to detect and intercept threats before they escalate downstream.
While there are additional early-stage controls that contribute to effective pre-message intervention, the following represent four of the most critical capabilities, each supported by leading payment security platforms such as those offered by Bottomline:
- Payments Verification: While not part of the post-authorization window, this upstream control plays a crucial role in preventing fraud at the pre-authorization stage. It ensures that payment instructions target the correct recipient. Verification of Payee (VoP) in the EU and Confirmation of Payee (CoP) in the UK serve this purpose, validating recipient details either during payee setup (CoP) or at payment initiation before the user authorizes a transaction (VoP). These measures reduce impersonation and misdirection risks, reinforcing the integrity of downstream controls.
- Sanctions Screening: Traditionally a compliance-focused function, sanctions screening becomes a potent fraud control when deployed in real time. It enables institutions to block payments to suspicious or high-risk entities, including those on sanctions lists, deny lists, or designated blocked accounts, preventing fraud that exploits spoofed identities or prohibited recipients.
- Payments Fraud Management: This layer integrates real-time behavioral analytics, leveraging advanced analytics and machine learning to evaluate device changes, geographic anomalies, and unusual transaction patterns. Institutions apply dynamic, risk-based scoring models precisely when needed, effectively stopping fraud while preserving a seamless customer experience.
- Insider Threat Management: While much of fraud prevention focuses on external threats, internal actors, whether malicious or negligent, can also initiate or facilitate unauthorized payments. Effective insider threat management (ITM) includes access controls, transaction limits, segregation of duties, and monitoring of privileged user activity. When integrated into early-stage detection layers, these controls help identify anomalies or misuse of internal systems before payment messages are constructed or released, reinforcing the integrity of outbound payment workflows.
Shifting the Defense Line: Acting Before the Message Is Built
In the realm of outbound, real-time payments, the opportunity to stop fraud is measured in milliseconds.
True resilience lies in deploying layered defenses between transaction approval and message creation. This is not theoretical; it’s the operational reality for FIs that are staying ahead of fraud in 2025.
Those that rely solely on post-message detection put avoidable pressure on processing systems by deferring intervention until the clearing or settlement stage. This approach demands rapid, high-volume decisioning under strict time constraints – conditions that risk disrupting legitimate transaction flows and breaching the performance requirements of real-time payment schemes.
By shifting fraud detection earlier, before the payment message is built, institutions can reduce system load, preserve transaction speed, and align with performance and compliance expectations for real-time payments.