A business owner receives an urgent overdue payment request from what appears to be a trusted vendor. Within seconds, $10,000 is transferred and instantly disappears into a network of money mules. No charge-backs. No recovery. Welcome to the high-stakes world of
Instant payments offer undeniable advantages, including faster settlements, minimizing counterparty risks and improving cash flow. The 2023 launch of FedNow by the Federal Reserve and the ongoing expansion of The Clearing House’s RTP network have made 24/7 instant money transfers more accessible than ever. In addition, other players like Zelle and emerging fintech platforms are continuously pushing the envelope with faster processing speeds, contributing to a more dynamic and competitive ecosystem. The recent increase of the RTP transaction limit to $10 million is a game changer for businesses handling high-value transactions, whether securing real estate deals or purchasing raw materials on tight deadlines.
Yet banks have been cautious about fully embracing instant payments. As of late 2024, nearly 1,000 banks are enrolled in FedNow, yet fewer than half have enabled both send and receive capabilities. One of the biggest challenges in instant payments is irrevocability — once a transaction is processed, it cannot be reversed under normal circumstances. Unlike credit cards, ACH or wire transfers, which offer dispute mechanisms and charge-backs, RTP is instant and provides little to no recourse for fraud victims or erroneous transfers. Even when fraud is reported, recipient institutions aren’t required to return the funds — making recovery unlikely and highlighting the need for vigilant monitoring.
So why is irrevocability a big deal? Cyber fraud schemes such as phishing, money mules and synthetic identities have evolved to exploit the speed of instant payments, using tactics that bypass traditional security measures. Fraudsters manipulate victims through social engineering, fake invoices and impersonation, often posing as trusted entities. Authorized push payment, or APP, fraud tricks individuals and businesses into transferring funds under pretenses, with recovery nearly impossible. Money mule networks quickly distribute stolen funds, making it difficult to trace or recover before they vanish into offshore accounts or cryptocurrency wallets.
Combating instant payment fraud requires industrywide collaboration. Banks, regulators, fintech platforms and telecom providers must come together to develop a real-time, shared fraud intelligence network — one that proactively flags suspicious transactions before funds disappear. By sharing data such as account age, ownership validation, device details, and token age/payment history, payment participants could gain critical insights to detect anomalous activity and prevent APP and account takeover, or ATO, fraud. Even telecom providers have a key role to play by protecting against spoofed or SIM-swapped numbers, further strengthening our collective defense against fraud.
Financial institutions of all sizes would benefit from a centralized fraud detection system, but smaller banks and credit unions — often lacking the infrastructure for advanced fraud prevention — stand to gain the most. A shared intelligence network could level the playing field, allowing all participants to access real-time risk assessments, identity verification and anomaly detection.
The question is no longer whether the industry needs a unified approach but who will take the lead to make it happen. FedNow, RTP, Zelle and leading fintech players must step up and spearhead this initiative. By working together, the industry can ensure that faster payments remain safe, trusted and accessible for everyone. Who will take the lead?