In a recent feature, we questioned Europe’s current approach to cross-border real-time payments. Now the P20 consortium has published a white paper that confirms and amplifies our editorial position: as real-time payments become the domestic norm, more consumers expect the same from cross-border payments.
However, to make this happen regulators and the industry need to harmonise cross-border rules and regulations, achieve interoperability between their systems and protect all parties against fraud and money laundering risk.
At present, though, there is little evidence of wide harmonisation.
“According to Data Bridge, one in three transactions could be instant by 2029.”
One approach mooted by P20 was to only permit cross-border real-time payments (RTP) between countries that pass strong tests on ID verification, KYC and enable solutions such as the UK’s Confirmation of Payee (CoP).
In essence, this is the approach adopted by many Asian markets which – as we noted in the last issue of Payments Cards & Mobile – is proving highly effective.
However, as Instant Payments take off over the next decade, something must be done.
According to Data Bridge Research, instant payments will account for one in three transactions by 2029, with cross-border e-commerce making up a significant proportion of these transactions.
That means the current situation, in which there is no or little recourse for consumers affected by fraud during a cross-border instant payment could get worse.
As we’ve made clear, the European approach of establishing “one size fits all” standards which are then dictated to market participants has yet to prove effective. So what’s the answer?
No standards means big problems
The absence of a rulebook with standards agreed by governments and industry players has created significant risk when it comes to real-time, cross-border payments.
In the UK and US alone, for instance, Visa says that fraud associated with Authorised Push Payments (APP) will reach $5.25 billion next year.
“While tokenisation and better AI modelling will cut fraud, new international standards are a must.”
While there have been moves to harmonise regulatory standards, progress has been slow. One option for governments is to consider greater use of data around transactions linked to payer and payee identities, something tokenisation attempts to address.
Last year, seven billion payment tokens were issued, leading to a 30 percent reduction in card payment fraud, according to Visa’s Risk Datamart.
The P20 white paper says applying AI and ML to anonymised data sets is another option that might help to identify fraud patterns in real-time cross-border payments and improve KYC routines by building up better profiles for fraudsters.
P20 estimate that utilising such models would give a reduction in fraud detection over 30 percent greater than that achieved with current practices.
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