How ACI Worldwide Intends to Tackle APP Scams Head-On

Real-time payments (RTP) and other cashless transaction methods allow for instant money transfers, greatly benefiting both individuals and businesses. Global RTPs, in particular, are responsible for shifting billions in remittance fees swiftly. However, this rapid transaction speed has become a fertile ground for fraudsters, who deceive numerous victims into losing their savings through authorized push payment (APP) scams. One effective countermeasure is integrating network intelligence into RTP messaging.

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The first segment of a two-part series examines ACI Worldwide’s recently developed signals network intelligence technology. Initiated seven years ago, this technology is poised for adoption among banks and financial institutions, addressing the increasing prevalence of APP scams in RTPs and highlighting how network intelligence can mitigate these threats.

A recent ACI report, titled “Real-Time Payments: Economic Impact and Financial Inclusion,” establishes a direct correlation between RTPs and financial inclusion. The report forecasts that contributions to gross domestic product from RTPs will rise from $164 billion in 2023 to $285.8 billion by 2028, marking a 74.2% increase. By that time, approximately 167.2 million previously unbanked individuals across the 28 countries studied could open bank accounts.

The analysis, conducted across 40 different nations, identifies Pakistan and India as leading candidates for financial uplift through RTPs. The report also anticipates that the net savings from RTPs for both consumers and businesses will escalate from $116.9 billion in 2023 to $245.8 billion by 2028.

ACI Worldwide secures the payment infrastructures of the world’s ten largest banks and services over 80,000 merchants. A pioneer in global payments technology, ACI supports a comprehensive ecosystem that includes banks, fintech companies, merchants, intermediaries, billers, and payment processors. Annually, ACI facilitates 225 billion transactions and employs an artificial intelligence layer to detect and flag fraudulent activities for its 6,000 customers across 94 countries.

In the realm of credential verification, ACI plays a vital role in card transaction security, encompassing authorization, authentication, and fraud detection.

Ankur Saxena, senior director and head of sales for ACI in South Asia, UAE, and Oman, noted that the company has achieved a market share of 78% to 80% in India, a significant market for their services, inclusive of both public and private sector banks.

“Our payments fraud solution is in use by India’s largest public and private sector banks across 16 to 17 channels, providing a consolidated risk assessment,” Saxena stated.

Surge in APP Fraud

The intelligence behind payment fraud was originally developed for detecting fraudulent card transactions and money laundering. As innovations like credit cards and ATMs became mainstream, the focus shifted to monitoring transactions for irregular consumer behavior. With the growth of online transactions and e-commerce, it became critical to identify malware on digital platforms. The pandemic further accelerated the adoption of cashless payment systems like Brazil’s Pix and India’s UPI, increasing focus on APP fraud, where scammers impersonate trusted entities such as banks or government agencies.

APP scams rely on victims willingly authorizing payments, which necessitates a high degree of impersonation skill from scammers. Common client-facing examples include romance, investment, and purchase scams; due to the nature of these transactions, reversing payments often proves difficult. With transactions completed in mere seconds, the window for fraud detection and prevention is considerably narrow.

According to an ACI fraud report, it is projected that APP fraud losses via RTPs will rise from 63% of all APP fraud losses in 2023-2024 to 80% by 2028.

Despite significant investments in multifactor authentication by financial institutions to combat fraud, these measures are less effective against APP scams, which involve payments authorized by legitimate account holders.

This situation raises critical questions: How can these scams be effectively mitigated? Is simple user awareness sufficient? What technological solutions can assist? What actions should governments and regulatory bodies consider?

In response, regulators are working towards enforcing stricter accountability measures on financial institutions regarding scam-related losses, encouraging the adoption of advanced monitoring systems for both incoming and outgoing transactions.

Innovative Defense Strategies

In order to tackle these challenges and curtail scam operations, banks must leverage AI technologies to analyze transactional data, identify suspicious behaviors, and enhance real-time cooperation among financial institutions, as emphasized by Cleber Martins, head of payments intelligence and risk solutions at ACI Worldwide.

“Following the Basel II framework’s introduction in 2004, banks grew increasingly receptive to continuous monitoring of transactions for irregular behavior, particularly concerning terrorism and financial crime,” Martins noted.

Martins has an extensive background working with pioneering companies in the field of AI, highlighting ACI’s early forays into transactional monitoring utilizing neural networks. The patented technologies developed from that era have evolved, now enabling near real-time detection of APP fraud.

Part 2 of this series will delve into the practical applications of ACI Worldwide’s technology in the fight against fraud.