Do Faster Payments = More Risk?

Transcription

1 Do Faster Payments = More Risk? Sean Carter, AAP, NCP President & CEO NEACH Payments Group

2 Agenda The talking heads and their views on the subject Initial returns on Same Day ACH What type of Risk is on your mind Need for controls on all Payment Processes Questions and Discussion

3 Reasonable yet presumptious The Federal Reserve will carefully scrutinize the security components of proposals it's receiving this month for technologies that can be used to enable faster payments in the United States. That's because a key issue in moving to faster payments is mitigating the greater risk of fraud. Tracy Kitten Director of Global Events Content and Executive Editor, BankInfoSecurity & CUInfo Appeared in Bank Info Security April of 2016

4 Specific threat for Debits Same Day ACH debits create new opportunities for fraudsters to use the shortened settlement windows to bypass existing fraud prevention tools and defraud financial institutions, payment processors, and their customers Robert McKinley Robert McKinley, Senior Analyst/Editor

5 Interesting Rob Hunter

6 So far so Good Same Day ACH We ve seen in the past that, anytime there s been a movement toward accelerated payment, the fraudsters see that as an opportunity, said Luis Rojas, vice president of product management at online banking security firm Guardian Analytics, in an interview with PYMNTSlast year. But the most important finding of the report, NACHA said, is that the survey respondents aren t seeing an influx of fraud related to initiating Same Day ACH transactions. According to the survey, no respondents said they had experienced an increase in fraud since implementing Same Day ACH services, whether as an originating or receiving institution. Those findings may appease concerns raised by some analysts in recent months that say Same Day ACH rollouts could be prime-time for fraudsters to strike. 23 Pariticpants surveyed make up 63% of the volume

7 Which Risk Concern you the most with Faster Payments? Operational Fraud Systemic Credit/Settlement Strategic Reputational Third Party

8 Three Keys to Managing Risks in Payments Who you allow to make payments How well you monitor those payments How often do you review the above Does speed impact any of the keys and if so which type of risk is increasing

9 Lets Look at Operational The key to real time payments is 24/7 processing? Is this something that is totally foreign to FIs? Same Day ACH Today and in the Future 3 settlement Times per Day M-F Potential for 4 settlement Times and on weekends and Holidays in the future Is the idea of more settlement windows and the need to pick up and process files throughout the day a totally foreign concept Human error and uneducated staff Does increasing the speed of transactions increase the likelihood of an occurrence What about reduction of risk related to operational risks due to faster payments?

10 Fraud Risk Access to the payment system Does speed increase this threat Access to end users of the payment system Does speed increase this threat Transaction Monitoring Does speed make this more difficult? Does better control on who accesses the system help offset any difficutlies? Manipulation of existing processes Does ongoing management and review of services help offset this threat?

11 Credit/Settlement Real Time Systems most likely will be credit push models Does this help is you have weak controls on who accesses the payment system? Same Day ACH Debits Does inadequate monitoring of transactions and poor selection of users lead to increased risks or is it the timing of the debit? Account Take Overs and Wire Fraud have been examples of what type of entries? Has speed been the problem in those cases?

12 Need for Controls Risk increases when you have poor risk management controls Follow the three keys and you can have proper risk management of your payments business

13 Question If the tracks are broken If the driver is not educated or carless If the passengers are not following safety orders Will the train going slower not crash? Will the faster train crash?

14 Summary Risk is inherent in all payments Controls are necessary Will faster payments increase risk For solid institutions- Maybe For Weak intuitions- Yes The biggest issue with faster payments will be felt in the impact of risk events occurring

15 Questions & Discussion Thanks