As two US senators turn up the heat on peer-to-peer (P2P) payments app Zelle for failing to stop fraud, Thierry Divenot points out that there is readily available, effective protection already used by P2P networks that can spot and even stop rogue authorized payments in real time
Peer-to-peer payment fraud has become such a huge problem in America that two US senators recently wrote to the owner of Zelle, the nation’s most popular P2P network, in a move that could foreshadow regulation.
In their letter, Senators Elizabeth Warren and Robert Menendez said the network had become “a preferred tool for grifters” and wanted to know what Zelle owner Early Warning Services, and the big banks that own it including JP Morgan and Bank of America, were doing to stop scams.
The stinging letter came after it emerged that 18 million Americans had been affected by payment fraud on money transfer apps. The letter matters because when US senators think a company or sector is failing to act responsibly, they will keep pushing. Just look at how Mark Zuckerburg, founder of Facebook, has been hauled before the Senate to answer concerns about how social media harms people. It has affected its reputation, ability to hire talent and share price. What is more, regulation is often not far behind.
The senators are right to be concerned. Last year, Zelle handled more than $490 billion in transactions. Its nearest rival Venmo handled $230 billion. And their popularity is growing. Yet the senators noted that “banks have chosen to let consumers suffer, blaming them for authorizing fraudulent transactions.”
Preventing P2P fraud in Europe
The truth of the matter is that there is no reason to stop Zelle – and all other P2P payment networks – enhancing their fraud detection and stop the “grifters,” even when payments are authorized, and better protect their customers.
Financial institutions on the front foot all around the world are already using highly effective fraud-mitigation protocols and software. These include P2P networks. Indeed, in Europe a leading P2P payment network has installed NetGuardians’ AI-powered fraud-prevention software to protect its users. This kind of software doesn’t just prevent single attacks on individual customers, but can also protect the whole network from orchestrated large-scale attacks. It is particularly good at stopping scams where the customer authorizes payment.
Customer profiling and collective AI
The software works like this. Rather than monitor what the fraudsters are doing, it focuses on building up individual, detailed profiles of customers. When something about a transaction is out of character – the timing, amount, recipient, currency or perhaps the browser – it raises an alert, gives it a risk score and sets out exactly what is suspicious. Should the alert turn out to be false, the software learns thanks to the machine learning . Furthermore, it pools groups of customers with similar profiles, fine-tuning behavior all the time.
An additional layer of protection comes from collective AI. This is when data from NetGuardians’ customer base is pooled (where permitted), giving a truly granular picture of behavior, helping to make the risk scores even more accurate. So intelligent is the scoring that it is effective even when a customer initiates and authorizes the transaction in fraud cases like romance scams, CEO scams, cryptocurrency cons and fake sales. And because all this is done in real time, it is perfect for instant P2P payments as any fraudulent transaction can be rejected before the money leaves the account.
An efficient, cost-effective solution
The real-life results are striking. The software spots and stops more fraud – up to nearly one-fifth more – with far fewer false alerts. Research shows that institutions using NetGuardians have up to 85 percent fewer false alerts, helping reduce the amount of time they spend investigating fraud and allowing them to redeploy resources to more value-added activities. This also helps them to build trust among customers who are bothered far less often about bone fide transactions. It’s a win-win.
NetGuardians fraud-prevention software provides exactly the kind of protection that P2P networks and payment service providers can profit from. Not only is it already successfully deployed against the fraudsters on a leading P2P network, but banks across the globe are also using it. It is helping to protect more than $7 trillion in assets worldwide.
What is more, the software is a plug-and-play solution that’s compatible with all the leading banking platforms, making implementation fast and low-cost.
The senators’ letter is a shot across the bows for all companies and financial institutions involved in P2P payments, which requires a proper attention from their end. NetGuardians’ solution can be rapidly implemented, it is cost-effective and efficient. It will better protect their customers, their reputations and easily prove that they have not, as the senators put it, “colluded with the sleazebags on the street to be able to steal.”
Thierry Divenot is head of global sales and marketing at NetGuardians.