Andrew Reszka, ANZ Market Lead, Verifi
The Australian market has never been short of innovative thinking when it comes to payments. Earlier this year the New Payments Platform (NPP), spearheaded by the majority of Australia’s major banks, was introduced to help improve the way in which payments are made. The platform essentially enables real-time payments between institutions, businesses and consumers. While this faster and more straightforward payments process is an important step forward for the Australian economy, businesses must understand the implications it may have on fraud rates.
What is the NPP?
The NPP is a payments infrastructure that will give consumers, businesses and government departments a way to make fast, versatile and data-rich payments using real-time clearing and settlement for simple or complex payment solutions. In practice, this means that Australians have the ability to make payments 24/7 through the use of a “PayID”, rather than being required to input traditional BSB and account details. For instance, consumers may submit a phone number, ABN or submit an email address as their PayID and link it to their personal bank account to make the payment.
Once a payment request is verified with the user’s PayID, the Reserve Bank of Australia (RBA) provides for the real-time and seamless settlement of that payment, via the NPP. Not only that, but the platform enables rich data services for businesses and consumers, delivered digitally, to ensure more complete remittance information is shared along with payments. For businesses, there are many benefits to these advancements. However, ensuring payments remain safe in a fast-paced environment is an ongoing challenge.
Fraud risk and the NPP
The rise in online shopping and recurring subscription payments has caused an increase in card not present fraud, accounting for 78 per cent of all fraud on Australian cards, as well as more chargeback claims. Now, with real-time online payments coming into effect, the risk of real-time fraud is also likely to increase.
In the pre-NPP era, a window of time existed between a payment being made and settled. It allowed for a few hours, to a day, in which it could be reviewed for signs of fraud and stopped in its tracks if it appeared to be an illegitimate payment. Even in this system, many fraudulent payments fell through the gaps, prompting disputes and chargebacks. However, with payments now occurring in real-time, there is no allowance for such a review process. As assistant financial system governor at the RBA Michele Bullock iterates, “The risk isn’t new – it just happens faster.” While the RBA and Australian banks have numerous systems in place to detect and prevent fraud, whether these measures are robust enough to protect against non-NPP transactions remains debatable.
Making online payments faster and easier is a major priority for businesses, but they must be careful with how they proceed to ensure it doesn’t compromise the payment safety of their customers. The NPP is bringing the Australian economy into a new era of payment innovation, but it is also likely that more fraudulent payments will occur in real-time. Collaborating with banks to create a closed loop payments process that provides the data needed to both detect fraud and deal with costly chargebacks is one step businesses can take to guard against the rising level of fraud (and its immediacy) in Australia.
Contact us today to learn more about how implementing a closed-loop, multi-layered fraud protection solution can help you prevent fraud.