Keeping P2P Payment Platforms Safe from Fraud

What is the significance of CFPB extending its reach and oversight into nontraditional banking entities? 

Robert Rendell: So in the last week, Sanjay, the CFPB announced that they are extending their oversight and reach into the non-banking sector, meaning they are looking at all aspects of financial transactions and how those transactions interact with the end consumer. This extends into nontraditional banks, meaning the payment processors, loan and originations, anything that is tied financially to a consumer, the CFPB will now have the ability to, you know, go in and audit, scrutinize and, you know, suggest recommendations in order to protect the consumers more effectively and efficiently. 

What is happening with a Senate inquiry into one of the more popular P2P providers, Zelle? 

Robert: Unfortunately, fraud is rampant. The consumers are getting scammed. And, you know, the pathway for the fraudsters is with faster payments and P2P and real-time payments. Zelle being a, you know, a payment vehicle in this arena is unfortunately getting picked on. And the level of customer adoption or consumer adoption, rather, is significant when it looks at, you know, Venmo and PayPal. So Zelle is looked at as a problem child. You know, adoption is through the roof, and it offers the fraudster the ability to move payments in real time. So, naturally, the consumers are filing complaints against Zelle, and Zelle is getting a lot of backlash in the media. 

Media reports have described Zelle’s fraud as “widespread.” But how would you describe the seriousness of fraud on Zelle and on P2P services like Zelle? 

Robert: So I think you have to take it with a grain of salt. The level of adoption has been significant compared to PayPal and Venmo. PayPal and Venmo have their own problems as well. But in order to do an apples to apples comparison, I think you have to look at it from the aspect of the total number of transactions and total number of dollars flowing through the payment provider and then benchmarking that against the total fraud dollars that are, you know, in comparison. And then you understand the real impact to the end consumer. So currently, this Senate has sent a formal request of information in, you know, formalized letter to the powers that be at Zelle. And they’re looking at it from the aspect of what controls, what– what is the payment provider doing to protect the end consumer? And it’s a little bit unique in the sense that, yes, Zelle is a payment rail to do, you know, real-time money movement. But at the end of the day it’s the financial institutions that are offering Zelle that is ultimately doing the protection of the consumer. 

So we know, of course, money moves in just a matter of seconds on Zelle. So with that in mind, what controls should banks have in place to protect their customers when there’s little or no time to stop or flag a fraudulent transaction? 

Robert: Sure. So having multiple layers of control and also policies against the transactions is going to be key. So first and foremost, monitoring the activity of the consumer would be critical. Looking at it from the aspect of, hey, is this customer having a session account takeover, whether it be on a mobile device or on desktop, and then looking at it from their normal activity. Who is Rob sending money to? How much, time of day, what device is he sending the money from? Also, they need to look at it as if Rob is being scammed out of money. So, again, both of these are going to look at, you know, first-time beneficiary, high-dollar amount, abnormal activity against the consumer’s normal behavior. 

What types of frauds and scams are you seeing gain steam on P2P platforms? 

Robert: Fraudsters are keen to leverage transactions that are happening in real time. And there’s multiple flavors of scams, you know, romance scams, tax scams, payroll scams, you name it. There’s scams that, you know, unfortunately, consumers fall victim to. And then, you know, the fraudster is smart. They get to have the consumer do the transaction on their behalf. And that transaction ultimately ends up in a mule account, and fraudsters are then able to line their pocket. Another flavor is account takeover. Consumers are, unfortunately, have malware on the machines. They get phished, smished, you name it. And the fraudster ultimately gains access to their account and then sends the money off in real time to another mule account where they end up gaining access to the funds. 

So Rob, what tips do you have for banks to keep their consumers safe when they’re using P2P services? 

Robert: P2P, first and foremost, is a great service. It offers consumers to move money in real time for legitimate reasons. You know, the banks really need to have multiple layers of control in place to protect the consumer. So authentication of session, session monitoring and then ultimately looking at the transaction itself in real time and applying, you know, science with A.I. machine learning to make sure that the bank and the fraud program is evolving in real time as fraud trends change. So again, layers of control: authentication, monitoring of not only the session but also the consumer with their transaction behavior and all doing that all in real time with a real-time payment method. 

Robert: We want to be able to offer consumers a way to transact from any device, at any time, from anywhere. And, you know, the financial industry really needs to look at this in a way that brings multiple datasets together holistically, in real time, to support real-time money movement. 

Why are fraud losses related to ATO growing%? Watch our on-demand webinar Stop Account Takeover Fraud Before it Happens to learn how to stop ATO attacks in real-time.