Real-time payments (RTP) have been flourishing globally in the last 50 years, progressively driven by the need for payments to keep up with the modern on-demand digital economy. However, the change from traditional automated clearing systems to ‘faster payments’ has its issues.
The accomplishment of anti-fraud measures, such as EMV chip, EMV 3-D Secure, and payment tokenization to alleviate card-present and not-present fraud in-store and online, has shifted the attention of fraudsters to more susceptible targets.
Demand Deposit Account (DDA) passes for business or consumer current, savings or checking accounts are kept in several locations. E-commerce platforms, invoices, payroll, mobile wallets all keep account numbers in their raw form, making them vulnerable to theft. Cyber-attacks entailing account-to-account transactions are hence rising at an alarming rate.
The main reason is the potential payoff. Although card and mobile payment fraud are quite common nowadays, the size of stolen funds is limited. The average figure of unauthorized account-based transactions, nevertheless, is higher. For instance, the average value of an unapproved ACH transaction in 2012 was $736, whereas the average sham debit card payment was $104.
Increasing the speed of the clearing process makes fraud prevention even harder. Identifying irregularities in seconds, rather than days, is a significant challenge for banks. The increased risk is well demonstrated in the UK, where payment fraud almost doubled in the first three years of the introduction of Faster Payments in 2008 and six years layer had increased by nearly 270%.
Central banks that have put in place are deploying or considering RTP; therefore must evaluate their current account-to-account fraud detection measures and look for other ways to lessen the effects of fraud. Tokenization is one solution that has attracted much attention, as it hides sensitive data from the transaction process.
Tokenization Prevents the Theft of Account Details and Makes Fraud Detection Easier
In the payment sector, Tokenization is the act of replacing sensitive data with context-specific proxy, which can have rules implemented to its usage to enhance security and can be handled and exchanged without affecting the underlying record. Based on the system and token purpose, it could be formatted and authenticated like the original record, facilitating non-disruptive use in an existing ecosystem.
Then again, new services tokens can be formatted in a more straightforward format for consumers’ frictionless use. The underlying account report can contain many tokens associated with it, each backing a defined functionality.
Tokenization has already succeeded in preventing fraud in-store and online, with all of the big payments systems, digital wallets, and original equipment makers adopting it, and the advantages can be used in account-based transactions.
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