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Financial Executives Worry About More Fraud With Same-Day ACH
April 27, 2016

By Jim Daly

The coming of same-day settlement of automated clearing house transactions to the U.S. next September has many bank and credit-union executives excited about the prospect of faster payments. But fears about more fraud are rising, too.

Image Credit: NICE Actimize
Wesley Wilhelm, lead fraud subject matter expert at NICE Actimize.

A recent survey of approximately 60 financial institutions by New York City-based fraud-control firm NICE Actimize found that 94% of respondents believe same-day ACH will pose new fraud threats. And 54% of respondents in the online survey completed earlier this month also said they do not have the appropriate fraud tools needed to handle same-day ACH transactions.

“We’re in that stage of new products/new functionality rollout—folks are beginning to think about how...a crook can take advantage of the new functionality,” Wesley Wilhelm, lead fraud subject matter expert at NICE Actimize, tells Digital Transactions News.

Same-day ACH will divide the current once-a-day settlement process into multiple windows, which means financial institutions will have less time to evaluate questionable payments. “You don’t have much time to identify a suspicious fraudulent transaction and remove it from the settlement process,” says Wilhelm.

While ACH transactions overall aren’t subject to nearly as much fraud as credit and signature debit card transactions are, some categories of ACH debits present more risk than ACH credit transactions. Financial executives seem to be most concerned about the same-day fraud exposure faced by receiving depository financial institutions (RDFIs) for debit transactions, according to the NICE Actimize survey. On a scale of one, for the highest concern, to four, for the lowest, 53% of respondents gave received debit transactions a one and only 4% gave them a four.

“I think a lot of that stems from the fact that it has a fairly significant customer inconvenience factor in there,” says Wilhelm. In addition to the actual losses, fraudulent ACH debits trigger a complicated return process that’s a hassle for consumers and costly for financial institutions, he says.

There was a middling level of fraud concern about same-day debit transactions on the other side, from originating depository financial institutions (ODFIs)—40% of respondents ranked originated debits a two, and 33% ranked them a three.

In contrast, 58% of respondents gave received ACH credit transactions a four, indicating little security concern, but responses about originated ACH credits were almost equally divided across the concern scale.

Current fraud-control tools run the gamut from manual reviews to high-tech analytical systems to restrictive policies controlling ACH access. Some 70% of respondents said they use manual reviews today, but to deal with the faster pace of same-day ACH, only 55% said they’ll use them going forward. Also, nearly 75% of respondents said they plan to use restrictive policies, up from 62% currently, and 70% will use risk-based authentication solutions compared with 48% at present.

“It’s a wait-and-see time frame as financial institutions begin to roll [same-day ACH] out and the transactions begin to flow, and folks see what impact it has on their operations,” says Wilhelm.

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