Entersekt | Resources | Encyclopedia | Immediate Payments
What are immediate payments?
Immediate payments, also known as real-time payments, are electronic fund transfers that are processed and settled instantly, 24/7 and 365 days a year. These systems allow individuals and businesses to send and receive money in seconds, improving the customer experience.
The risks of immediate payments vs traditional bank transfers
Traditional bank transfers, such as automated clearing house (ACH) or EFT transfers, can take hours or even days to process, especially outside of business hours. Immediate payments eliminate these delays by enabling real-time settlement between banks and financial institutions. This speed, however, introduces new challenges in fraud detection and transaction monitoring. Immediate payments are typically irreversible and enable fraudsters to get hold of their victim’s funds faster.
Immediate payment systems are gaining traction globally, with examples including the UK’s Faster Payments, India’s UPI, and the EU’s SEPA Instant Credit Transfer.
How can financial institutions safely adopt immediate payments technology?
Immediate payments offer a competitive advantage by meeting consumer demand for speed and convenience. However, they also require robust fraud prevention strategies, as the real-time nature of these transactions leaves little room for intervention once a payment is initiated. Financial institutions must adopt advanced authentication, behavioral analytics, and real-time risk scoring to secure these transactions.
Example
A customer uses their banking app to instantly transfer funds to a friend on a weekend. The transaction is processed and settled within seconds, even though it’s outside of traditional banking hours. In that example, an advanced authentication system would detect that the risk is low, if the friend was already a beneficiary, for instance. If the customer had not paid money to that friend before, the risk assessment tool may initiate a step-up authentication challenge and send the customer a contextualized in-app message, checking whether they were sending that amount to the location of the payee’s account. Once approved, they’re able to make the immediate payment to their friend.
Additional resources:
Keywords:
What are immediate payments?
Immediate payments, also known as real-time payments, are electronic fund transfers that are processed and settled instantly, 24/7 and 365 days a year. These systems allow individuals and businesses to send and receive money in seconds, improving the customer experience.
The risks of immediate payments vs traditional bank transfers
Traditional bank transfers, such as automated clearing house (ACH) or EFT transfers, can take hours or even days to process, especially outside of business hours. Immediate payments eliminate these delays by enabling real-time settlement between banks and financial institutions. This speed, however, introduces new challenges in fraud detection and transaction monitoring. Immediate payments are typically irreversible and enable fraudsters to get hold of their victim’s funds faster.
Immediate payment systems are gaining traction globally, with examples including the UK’s Faster Payments, India’s UPI, and the EU’s SEPA Instant Credit Transfer.
How can financial institutions safely adopt immediate payments technology?
Immediate payments offer a competitive advantage by meeting consumer demand for speed and convenience. However, they also require robust fraud prevention strategies, as the real-time nature of these transactions leaves little room for intervention once a payment is initiated. Financial institutions must adopt advanced authentication, behavioral analytics, and real-time risk scoring to secure these transactions.
Example
A customer uses their banking app to instantly transfer funds to a friend on a weekend. The transaction is processed and settled within seconds, even though it’s outside of traditional banking hours. In that example, an advanced authentication system would detect that the risk is low, if the friend was already a beneficiary, for instance. If the customer had not paid money to that friend before, the risk assessment tool may initiate a step-up authentication challenge and send the customer a contextualized in-app message, checking whether they were sending that amount to the location of the payee’s account. Once approved, they’re able to make the immediate payment to their friend.
Additional resources:
- Blog: Unveiling the dark side: How real-time payments push real-time fraud
- Video: Decreasing friction and increasing security with Browser ID
Keywords:
- Real-time payments | Payment fraud | Immediate payments
