The global instant or real-time payments market is an integral part of the rapidly growing digital economy.
There are currently 80 countries worldwide with instant payment systems, including South Africa’s PayShap, developed by the local banking industry to improve financial inclusion and reduce dependency on cash.
While real-time payments have many benefits, they also attract a higher level of fraud.
Scott Manson, senior director of payments at LexisNexis Risk Solutions, points to interoperability as fundamental for faster transaction processing but also fraud prevention.
Interoperability, enabled by shared Application Programming Interfaces (APIs), creates a connected ecosystem where multiple devices and applications share data, enabling data to flow seamlessly between banks, fintechs, and payment platforms.
“It’s what enables open banking, facilitates real-time payments and drives embedded finance today. Without interoperability, faster payments would not be possible. This [interoperability] is the platform on which banks can compete with fintechs in today’s digital-first landscape.”
According to Lexis Nexis Risk Solutions’ research, the global instant payment market is forecast to reach $82.4 billion by 2028, and add over $285 billion to global GDP.
The report notes that instant or real-time payments, including account-to-account (A2A) and peer-to-peer (P2P) transactions “have been a boon for consumers”, especially for the gig economy and the underbanked, fostering financial inclusion. They also benefit financial institutions, non-bank card issuers and payment service providers (PSPs).
But speed comes with risk.
“Globally, fraud in instant payments is ten times higher than in regular payments due to the sheer speed and irrevocability of instant payments. This means payment service providers have mere milliseconds to prevent fraud. In South Africa, our latest statistics show that financial institutions lose 4.52 times the average transaction value per fraudulent transaction,” says Manson.
Spike in crime puts digital ID, KYC in the spotlight
According to LexisNexis Risk Solutions, fraud prevention must occur before transactions take place to make sure the payment is delivered instantly. Robust account opening and KYC processes are vital to identify fraudsters and stop fraud before it happens.
Pre-screening tools like payee validation and account checks help reduce fraud. In addition, with real-time cross-border transfers, banks need fast, seamless and multilayered safeguards throughout the customer journey.
AI impact
Manson notes that AI is increasingly used to forge identities at scale, employing deep fake images, video, audio, and falsified documents to bypass security protocols.
“However, we are fighting fire with fire and seeing significant advances in the way AI can be used to detect and prevent fraud too, particularly surrounding the authentication of documents. AI learns and adapts to emerging fraud tactics, enabling payment service providers to stay one step ahead of criminals. For example, new video-based (liveness) ID document capture technologies can help prevent the injection of AI-generated or altered images – a critical leap beyond traditional still-image capture. It’s vital that institutions harness the positive applications of AI to make payments safer, so that they can reap the benefits.”
Share