Tis the Season…for Increased Fraud Risk
November 30, 2022 | 2 min read
We’ve all seen the YouTube videos, read the NextDoor posts, or experienced it first hand — porch pirates can ruin the holiday season by driving through neighborhoods and snagging packages meant as gifts for your family and friends.
Unfortunately, pirates roam the digital world too…every time we open a new account and every time we make a payment. And while we can’t all set a glitter trap to catch them, we can take steps to ensure that newly-opened accounts and accounts linked for payments are being used by their rightful owners.
Funding new accounts and connecting a deposit account to make or collect a payment has become much easier over the past decade. However, the increasing availability of same-day payments through ACH fund transfers, real-time payments (RTP), and FedNow also increases the risk of lost funds from a quickly-connected deposit account.
In the past, a waiting period of 2 to 3 days gave time for financial institutions to catch fraud, but money is moving more frequently in real-time these days. So, just like a package disappearing into the hands of a porch pirate, funds will be hard to recover.
As ACH and RTP increase in usage for consumer payments, what can be done to reduce the risk of fraudsters hurting both consumers and your business?
Use account owner validation tools. When using Instant Account Verification tools, ensure you’ve got an account owner check in place too. Not only should you check for an accurate account and routing number, you should check what names are tied to the account.
Do the connected account owners match the person that is opening the new account or paying for the service? MX can help financial institutions and fintechs with our identification service, most commonly used when people are connecting accounts for payment.
Step up your analysis when you perceive risk. Thanks to modern account aggregation, you can add depth to your account connecting process by not only requesting the account number, routing number, and owner information, but by also requesting the last 3 months of transactions. You can learn a lot about a customer’s risk with this check!
Key things to look for include:
Alert consumers to new devices connecting to accounts. Modern authentication services and strong device identification capabilities are of utmost importance for deterring fraudsters from compromising good customer accounts and stealing funds.
In the same way that e-commerce companies send alerts when packages are delivered, can you send alerts when customers connect from new devices and locations? Adding these common security features can go a long way to protecting your customers. Ask your vendors and IT teams:
Modern and secure technology can be used to help users safely and efficiently connect their accounts to make payments this holiday season, but the onus is on financial technology providers to meet the mark and ensure bad actors don’t ruin the holidays.
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