Innovation in payments has drastically accelerated during the past five years. And consumers and businesses have a multitude of payment options whether through digital or physical means. With that has also come a marked rise in payments fraud.
As the saying goes, fraudsters follow where the money is. And with so much money crossing payments rails daily, it is an area ripe for bad actors to manipulate. Some sobering data highlight this growing concern. The Federal Trade Commission (FTC) reported that in 2021, consumers filed 2.8 million fraud reports. That is a whopping 70% increase compared with the previous year.1 And according to research from Nielsen, payments fraud could reach more than $400 billion during the next decade.
Furthermore, in 2021 checks and automated clearing house (ACH) debits were the payment methods most impacted by fraud activity. This is according to the Association for Financial Professionals.
That’s why Socure has entered the payments risk space with the introduction of its newest product, Socure Account Intelligence. The product instantly verifies domestic bank account status and ownership prior to processing ACH payment transactions or funds disbursement. Only the consumer or business name as well as the bank account and routing numbers are needed for this real-time service. This real-time service establishes trust between accounts and supports regulatory compliance.
The Problem of Assessing Trustworthiness
Evaluating the potential risk of an account or payment to be fraudulent is critical. It is critical in helping to minimize losses and prevent customers from falling victim to scams. For transactions in which an exchange of goods is made, it’s important to have confidence the payment will not be returned prior to the purchase being completed.
Fraudsters also take advantage of the real-time nature of payments. Consumers want—and indeed, expect—payments to be sent and deposited in real time. However, bad actors abscond with the money before detection due to the lag in ACH payment processing..
“At the same time that financial institutions are wrestling with new fraud types and the rise of tactics like business email compromise, they are rolling out new faster payments solutions that innately allow less time to detect criminal activity. The good news is that the security providers are responding with solutions,” said Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group, in Mercator’s Faster and Real-Time Payments Fraud report.
Institutions must also comply with stringent regulations when it comes to payments. Nacha, which governs the ACH network, now requires payment originators to validate that an account is open and accepts ACH entries.
The Socure Solution
These concerns are why Socure entered the payments risk space, targeting ACH payments fraud with the introduction of Socure Account Intelligence.
The solution helps financial institutions involved in payments ensure that the consumer or business involved owns the bank account. And it validates that the account is open and can process an ACH transfer. Only the consumer and/or the business name, account number, and routing number are needed for this real-time service that expedites payment processing and promotes operational efficiency. Additional personally identifiable information (PII) is optional, but not required. This is vital in a world where privacy is paramount and many are wary of giving up PII in the digital realm.
The product also supports Nacha’s new WEB Debit rule for payment originators (noted above) in a streamlined and economical fashion. Clients can also be comfortable knowing that Socure is an official Nacha Preferred Partner when it comes to stopping payments fraud, a designation given to companies offering only the most innovative and strategic solutions to the ACH network.
For existing Socure customers, the solution integrates the new product into Socure’s ID+ platform. It leverages intelligence from 12 identity verification products to produce best-in-class matching accuracy all within a single application programming interface (API). Socure Account Intelligence also delivers real-time results as opposed to competing micro-deposit solutions. Those can take days, resulting in significant consumer drop-off. This is especially critical in today’s environment of real-time, instantaneous digital payments.
ACH payments are used in a wide variety of circumstances, from bank account funding, disbursement of government benefits, bill payments, insurance payouts, merchant payments, peer-to-peer payments, and much more. Socure Account Intelligence can enable financial institutions to facilitate these payments safely and in real time.
1 Note these figures represent all fraud reports, not just payment fraud