Think different. It was an iconic tagline for Apple from 1997 to 2002, calling forth innovators from Miles Davis to Jim Henson to Muhammad Ali. “Think different” could also be a rallying cry for the current state of payments and the ability to secure them as the innovators in the business continue to innovate and the fraudsters continue to find ways to disrupt them.
This perspective was the topic of a recent Bottomline Payments podcast “Developing A New Payments and Security Mindset,” featuring two executives from the company: risk and fraud prevention manager Chris Gerda and VP product management and strategic solutions Jessica Cheney. Both are coming off a successful appearance at the NACHA conference where the interplay of payments and security was a key topic. Gerda believes the connections between transactions and their security is one of the issues that demands a new mindset. That mindset is a holistic view rather than isolating the payment from the fraud defense. Look at them holistically and fraudsters don’t have to be so daunting.
For evidence, Gerda pointed to the recent T-Mobile hack where personal data was accessed through SIM cards. It’s an example of what will continue to be the personal nature of fraud in the future. And the creativity it displayed means that banks and corporates will need to work together more aggressively.
“It's not just banks that are responsible for stopping fraud. Now the corporates are much more involved as well,” he said. “And then, it's not just the corporates that are involved it's the employees, individually, that are becoming more keen, more open, and more knowledgeable about fraud because it's impacting their personal lives. We’re all starting to kind of come together to be stronger.”
Think about the issue holistically, Gerda said, and the perspective switches from securing the payment to securing the relationship. It switches from a simple invoice to the content and tone of conversations between supplier and vendor.
On the payments side, securing real-time payments continues to be a source of conflict. Some in the industry believe the speed and irrevocability of real-time payments makes it harder to play defense against fraud. But for Cheney and others, the reality is that fraud is no greater threat for real-time than any other payment method. Again, a new mindset is needed.
“Transactions are the area where real-time payments facilitate interacting in a different way, with a company's customers, their suppliers, or their trading partners,” Cheney said on the podcast. “Real-time payments have taken anti-fraud measures to a different level when it introduced within its message sets and workflows, the ability for a receiver of a payment, or the receiver of a request for payment to ask the sender of those items a question. They refer to this as a request for information, but more importantly, it provides a mechanism for two-way communication in that secure channel, because it's in the same rail that the funds actually traverse as well.”
Not only does that interaction reduce the capacity for fraud, it has also opened a new communications channel that Cheney refers to as conversational payments. While the ISO 20022 messaging standard is an integral part of that channel, Cheney stressed on the podcast that the security of the channel and the fact that it validates the relationship on both sides of the transaction is as important as the standard itself. Instead of multiple phone calls, emails and a trail of sticky notes on the laptop screen of an accounts payable director, interactions are attached to the payment record or attached to the request for payment itself. They can easily be retrieved in the future for audit or clarification purposes.
Cheney also addressed a factor that dominated the various Federal Reserve panels at NACHA: interoperability. The word has been a staple in the healthcare and cloud computing business, but it is a different context for real-time payments. With NACHA, The Clearing House and the Fed’s upcoming FedNow service all competing for bank business and attention, the ability for people, processes and systems to live in the same environment is critical. Cheney has been intimately involved with the interoperability issue as part of several industry task forces.
“We as an industry went into putting this ecosystem together knowing that interoperability wasn't just the buzzword, it was the key to success,” she said. “All these services that have grown up around the concept of real-time payments have really embraced interoperability. It’s not just a buzzword.”
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