It’s hard to believe that it’s already December. After a year of looking back on the biggest headlines in payments month-by-month, this month seemed like an ideal time to reflect on the year’s biggest trends as well as November’s most interesting headlines. But rather than try to recap everything that happened over the course of the year, our final Payments Post installment will focus on a distinct set of headlines related to payment scams that touch on two perennial themes that were particularly relevant this year: the viability of account-to-account payment methods and fraud. We’ve touched on this previously in a Payments Views post by my colleagues Joanna Wisniecka and Bethany May. Let’s dive into why this was such a big deal in November, how regulators and operators are responding, and what it could mean for the payments environment more generally.

Here in the United States, Zelle has attracted attention from lawmakers and consumer advocates concerned with the potential for fraud for some time following its 2017 launch. As our Managing Partner, Bryan Derman, often says ‘there is nothing more appealing to a fraudster than a new, widely used payments system that sends money in real-time.’ Democratic Senator Elizabeth Warren of Massachusetts, for example, issued a report in October 2022 accusing Zelle and its participant banks of allowing increased fraud on the system. Since then, Zelle has attracted increased scrutiny, both in Congress and in the press. In November, Zelle parent EWS disclosed that financial institution network participants had begun reimbursing transactions on the network for scam victims as early as June 30 of this year. That’s a meaningful and sizable commitment. It could also be a concern for small banks and credit unions who have previously stated that they would have to leave the network if required to reimburse scam victims. 

Meanwhile, Australian bankers are clearly similarly distraught over the rise of financial scams. They’re taking what appears to be a proactive and collaborative approach to addressing the issue through the launch of the Scam Safe Accord in November. The agreement represents the entire consumer banking ecosystem in Australia across different types of financial institutions (e.g., banks, credit unions, and building societies) and includes a variety of measures designed to reduce the risk of fraud across the consumer banking space. The accord provides for a $100M AUD payee confirmation system and requires that financial institutions join a fraud reporting system and act on information from the Australian Financial Crimes Exchange by 2024. In all, the efforts of the Australian banking community represent a significant investment that points to the scale of consumers’ scam woes globally.

Finally, India also took a step towards limiting fraud risk by implementing a time delay on transactions over Rs 2,000 (around $24 USD) when counterparties to the transaction haven’t previously transacted with each other. The four-hour pause would apply to “a wide range of digital payments through Immediate Payment Service (IMPS), Real Time Gross Settlement (RTGS) and even the Unified Payments Interface (UPI)” according to The Indian Express. Government officials acknowledge that the move introduces friction to the payments environment but view it is necessary to reduce fraud risk. Again, regulators, operators, and participants globally are reckoning with increasing scam threats and are being forced to find creative solutions to protect consumers.

We’ll keep an eye on scams, account-to-account payments, operational and regulatory responses, and more as the landscape further evolves in the new year. In the meantime, it seems that fast payments will continue to be challenged by some tenets of their success: speed and convenience. If operators must take steps to limit that, how quickly will fast payment systems like Zelle and others be able to grow and compete in new use cases, like at the point of sale? It’s a big threat to fintechs, a big opening for creative fraud experts, and a question that will surely shape the coming year. Until then, we welcome your views and opinions on the topic! And as always, we’re here to talk if you have a payments question you need help answering. In the meantime, have a happy holiday season and a great start to 2024.