The decision of the Federal Reserve to launch its real-time payment service FedNow, has been widely lauded as a breakthrough for the growth of instant payments in the US.
Nonetheless, there have been warnings over the potential of the increase in fraud as the technology grows into the mainstream.
Doriel Abrahams, Head of Risk at Forter described FedNow as ‘a brand new and exciting tech initiative led by the Federal Reserve’.
He also detailed that as a frictionless payment rail has the potential to dramatically improve, and hasten online payments and the consumer shopping experience’.
However, Abrahams went on to issue a warning that fraud combating needs to be elevated in a challenging market as the tech evolves.
Abrahams stated: “As with any new technology, there’s a draw for fraudsters who will seek out novel ways to exploit both merchants and consumers. A major question mark with FedNow remains: Who’s on the hook when fraud undoubtedly occurs?
“While the Federal Reserve offers extensive information about anti-fraud strategies, it doesn’t include information about the liability for fraud. I would strongly encourage merchants to figure that out before they introduce instant payments to their platforms.
“Just like peer-to-peer apps like Venmo and Zelle, FedNow, a public version of these networks, may present technical challenges in both widespread adoption and merchant implementation.
“When implementing FedNow or any instant payment service, it’s imperative that merchants prioritise security and controls in the continued fight against fraudsters. Those who offer the most convenient and safe transactions will win the next one million shoppers – but only if these merchants hold onto their shoppers’ trust.”
The Federal Reserve has announced that 35 institutions have already adopted FedNow, including JP Morgan Chase, Wells Fargo and US Bank, with an additional 16 entities signing up to provide services for various banks and credit unions.
Federal Reserve Chairman, Jerome Powell, commented on the successful launch, stating: “The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient.
“Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck, or a company to instantly access funds when an invoice is paid.”