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Rising fraud risk tipped from move to real-time payments

Clancy Yeates

Australian consumers are predicted to become more attractive targets for fraudsters and scammers when a $1 billion real-time payments system launches later this year, prompting banks to beef up their anti-fraud defences.

A new system coming in 2017 will for the first time allow customers of different banks to transfer money in real-time, rather than payments taking up to three days, as occurs now.

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Real time payments on its way

The New Payments Platform, set to go live in 2017, will change the way businesses and individuals make electronic payments.

While promising greater convenience for customers and businesses, switching to real-time payments can also increase the rise of fraud. That is because when funds settle instantly, banks will no longer have a day or more to investigate and stop payments that appear suspicious.

Albert van Wyk, the head of fraud at information agency Experian, said he expected scammers to step up their attempts to get consumers' private financial information – used to commit fraud – when Australia moved to a real-time payment system under the New Payments Platform (NPP).

"As we move closer to NPP I am expecting a considerable amount of additional emails, texts, phone calls to be launched at consumers to try to gain access to their information," he said.

Against these risks, the NPP said Australian banks would roll out new systems to lower the risk of fraudulent or accidental payments being sent. Even so, it also urged customers to be aware of scams seeking their bank account information.

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Mr van Wyk, who consults to banks and other companies on fraud, said real-time payments would force banks to put more emphasis on preventing fraudulent transactions from occurring, as opposed to detecting suspicious transactions.

He pointed to the Britain, where online banking fraud jumped 132 per cent after it introduced a faster payments system in 2008.

Given such experience overseas, he said: "I think the implementation of a real-time payment environment will definitely lead to increases in opportunity for fraudsters to gain access to money, in a much faster way than what they ever have."

A Bank for International Settlements report in November also said real-time payment systems "may be a more attractive target for fraud than traditional retail payments," and banks needed to have "robust" systems to counter this.

In response, chief executive of NPP Australia, Adrian Lovney, said fraud rates in Australia were among the lowest in the world, and most of the fraud that occurred after real-time payments were introduced overseas were "old-fashioned trickery to deceive people into parting with their money".

Australian banks already conducted "real-time" fraud screening, he said, and lenders would continue to use other security measures such as fingerprint login protection under the NPP.

"The NPP will also incorporate new functionality designed to reduce the risk of misdirected or fraudulent payments, enabling the sender to confirm the name of the recipient before finalising a payment to a simple payment address such as mobile phone number," he said.

Since the UK launched its faster payment system in 2008, there have also been big advances in digital banking security, phone security, and greater public awareness of common scams.

Mr Lovney pointed out that the most common type of fraud in Australia today occurs when a consumer's card details are stolen and then used to make unauthorised payments, often online.

In contrast, transactions under the NPP will be payments from an actual bank account, so a fraudster would need to obtain the login details or a customer.

Even so, credit bureaux have warned of rapid growth in online identity theft, including where cyber criminals steal someone's identity and use it to obtain credit from banks.

Mr van Wyk said banks were getting better at identifying fraudsters even where they had the correct login details, such as by monitoring which devices were used to log into accounts, or the location customers were logging in from. But there was still a greater need for public education about minimising the risk of fraud, he said.

"The general man on the street, I don't believe today, has a clear enough understanding of how important it is to safeguard the information that they have and how important it is to not expose that information to either phishing scams, or emails or texts or phone calls that are inauthentic," he said.