AI isn’t the only technology revolutionizing business finance. Electronic payments have increased dramatically in volume and sophistication, allowing businesses to increase the number of transactions they can process. This in turn makes money movement faster and more efficient and helps smaller teams focus resources in areas of their operation that require greater attention. With greater automation and digitization of payment rails, however—such as ACH, wire, and real-time networks—the risk of cyber threats, fraud, and operational errors also increases. For that reason, it is more important than ever, not only to implement policies that support fraud mitigation but also to ensure employees and other key stakeholders understand and adhere to those policies.
Double-edged sword: faster payments=faster fraud
As businesses move quickly to implement process automation, it can be easier for fraudsters to find gaps where internal processes and controls are not revised in tandem. In the current landscape of real-time payments (RTP), the immediacy of transaction approval enables funds to be transferred before standard verification protocols—such as dual controls or secondary reviews—can be applied, increasing the risk of unauthorized or fraudulent activity.
The amazing speed at which modern payments technology can now process a high volume of transactions is undoubtedly a good thing. Unfortunately higher, faster transaction volume directly translates into greater potential for fraud. It used to be that a group of fraudsters would try to impact 10,000 businesses a day, but now with AI they can impact over 500,000 targets a day thanks to the higher transaction volume enabled by today’s rapid payment technologies.
AI is doing the heavy lifting and enabling fraudsters to go after businesses at a concerning rate—especially as businesses increasingly turn to digital payments and RTP to streamline financial processes. But even as fraudsters get more creative, there are multiple steps businesses can take to protect themselves.
Where businesses can turn to leverage technology and protect finances
The first part of any solid fraud mitigation strategy is education. At Synovus we focus on three key questions to help our clients identify fraud vulnerabilities and mitigate associated risks.
1. What are the latest regulations and policies?
Regardless of what governing body they come from, regulations and policies are designed to protect the end users of services. As companies look to implement new technology into their operations to streamline or expedite processes, such as money movement and procurement, it is imperative that these processes stay up to date with regulations that are designed to guide use of technology in a way that protects both their operations and their customers.
Understanding the interplay between technology and Fedwire system is one area that businesses should pay particular attention to; the transition to Federal Reserve Bank Fedwire Funds ISO 20022 messaging format, for example, has implications for fraud risk (such as BEC and phishing) as it relates directly to how electronic communications around payments are encrypted and disseminated. Complying with the changes means businesses may need to upgrade payment interfaces to support the standard; adopt payment gateways/reporting platforms that support ISO 20022; or ensure they can accommodate the associated data requirements and train employees responsible for payment processing around requirements and any changes for processes or workflows. By reviewing these processes, business can ensure that they are in a position to get the most out of real-time payments and ensure safeguards at the same time.
2. What are the potential risks associated with the different payment rails for money movement?
Every decision comes with its own risks, and choosing the correct payment rail is no exception. It is vital to identify potential operational vulnerabilities across channels to address gaps and mitigate unnecessary risks. Above all, risk and compliance systems monitoring should take place in real time. With faster, more sophisticated technologies increasing the potential for fraud, it is important for commercial organizations to act fast in order to head off such risks before they become an issue. Real-time risk monitoring can also assist in facilitating greater visibility and traceability with money movement. Other ways to protect against risk across different payments rails include enhanced cybersecurity and fraud mitigation measures (stronger authentication methods, MFA, encryption, etc.) All of the elements above are becoming standard compliance requirements to address elevated fraud and bad actor tactics, regardless of the channel in which they occur.
3. What are the right channels to meet business needs?
Each channel carries its own operational exposure. Once a business understands the risk associated with the different channels for key payment operations, they can evaluate those channels against their risk appetite to help determine which options best meet their business needs while mitigating the risk of fraud.
AI and other technologies are becoming a double-edged sword when it comes to commercial operations. While money movement is faster than ever and more processes can be streamlined through automation, technology is helping fraudsters develop increasingly complex, scalable, and effective schemes. Partnering with the right bank and engaging in conversations about vulnerabilities, fraud mitigation, and employee education can help businesses leverage today’s cutting-edge technology to their advantage without taking on unnecessary risk.
Chad Parramore is Head of Product Commercialization at Synovus Bank.
