Next week marks the start of the annual NACHA conference where it is expected that an uptick in B2B payments and the growth of real-time payments will take center stage. While real-time payments will certainly be the star of the show, as an organization NACHA is about more than the need for speed.
For example, the organization’s ACH Network, which includes standard and real-time formats, processed 7.3 billion payments in the second quarter, up 655 million over 2020. The value of those payments was $18.4 trillion, an increase of 24.6% from a year earlier.
B2B payments increased 28.7%, to 1.3 billion payments. According to NACHA president and CEO Jane Larimer, the B2B segment was growing before the pandemic, but the dramatic acceleration away from paper checks was behind the spike in electronic payment methods.
Judging from the event’s keynotes and session tracks, expect that three other issues will come to the forefront: development of the Federal Reserve’s FedNow faster payments rails, securing real-time payments, and spreading the gospel of the ISO 20022 messaging features. All three will deserve attention as the show, and its aftermath, progresses:
FedNow: The NACHA agenda is dotted with Federal Reserve executives and informational sessions about the role the Fed will play in driving real-time payments adoption. Most recently its focus has been on the benefits real-time payments brings to financial institutions and its utility for consumer bill pay.
“Financial institutions have the opportunity to build upon RFP (request for payment) functionality to deepen relationships with consumer and business customers who are increasingly demanding advanced digital banking services and new payment options,” a recent Fed blog post states. “For instance, they may leverage capabilities within their digital channels to support auto-authorization capabilities for certain RFPs. Billers could use this functionality to automate more of their one-off payment activity.”
Securing Real-Time Payments: To paraphrase Jessica Cheney, Bottomline’s vice president of product management and strategic solutions, real-time payments currently suffer from a “myth” that because the format is fast and contains an irrevocable element, that it’s not securable. The reality is exactly the opposite, and the NACHA show will feature that anti-fraud feature set. It’s also notable that a recent report from the Association Of Financial Professionals (AFP) shows that faster payments fraud, to use its terminology, represents only one percent of current fraud cases. In surveying its members, the AFP found that 60 percent of financial professionals reported
no change in the incidence of payments fraud in 2020 compared to 2019. Thirty percent reported an increase but real-time payments were not the main offender. The real culprit was business email compromise; 62 percent of the AFP membership said BEC as the primary source of fraud attacks.
The AFP survey also showed that the decline of paper checks has been a positive development. In 2020, fraud associated with checks and wire transfers was heavily impacted (66 and 39 percent instances). However, it has decreased in the past year, from 74 percent and 40 percent in 2019.
Financial Messaging: The ISO 20022 messaging format, while not limited to real-time payments, will serve double duty at NACHA. First, it transmits valuable data that be used for customer intelligence. Second, it serves as an anti-fraud tool. According to Bottomline’s Ruud Grotens, Head of Solution Consulting, Fraud and Financial Crime, a good example of how ISO 20022 fights current fraud challenges is identity theft.
“This version of “authorised” fraud is tough to spot without the right dataset,” Grotens told The Paypers. “In this case, the customer appears to be authenticating the payment. But the amount of data attached to the ISO 20022 format will allow FIs to automate finding these types of payment irregularities. Now with the addition of Artificial Intelligence (AI) and Machine Learning (ML), the data generated from ISO 20022 can be placed into patterns. When patterns are broken, a fraud alert is sent out.”
FedNow executives have committed to the ISO 20022 format when it plans its rollout, now set for 2023.
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