ABC News reported on the issue of losses that person to person (P2P) payment providers sustain when they offer a transaction account to transaction account transfer that uses ACH. In the rush to offer the very marketable concept of “instant payments”, some P2P providers are taking a risked base approach rather than a good funds model. In actuality, ACH transactions can take days to clear giving the sender an opportunity to drain their account before the debit is attempted on their account.
Currently, when a consumer sends money over a mobile phone app in the U.S., it can take up to four or five days for the transaction to fully clear, depending on the banks that are used. So even though the phone app might say the funds are “available” to the payee immediately, the money hasn’t actually traveled through both banks yet.
That loophole helped someone perpetrate a scam on an ABC News viewer who came to The ABC News Fixer after the scammer stole $1,800 from him using a mobile banking app.
The article goes on to comment about the Fed’s plans to work with industry participants to devise a faster payments mechanism and how this may help the P2P marketplace:
The Federal Reserve has been nudging industry players toward faster payments for some time. A task force of 300 banking, consumer, retail and tech professionals have been meeting since April to try to devise a faster, safer alternative to the current system.
Just “faster” won’t really help the P2P market, it will need to be truly instant to avoid the fraudsters intent on defrauding the system and taking advantage of any delays.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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