RBA puts industry on alert over digital fraud

The growing level of fraud incidents in payments has spurred the need for digital identity solutions as cashless transactions and the shift towards data sharing continues to reshape the payments industry. 

These themes in fraud and cybersecurity were tackled by a panel of experts at the RFi Group's Australian Retail Banking Summit in Sydney on Friday.

In a wide-ranging discussion speakers included (pictured from left): Novatti chief executive Peter Cook; Reserve Bank of Australia head of payments policy Tony Richards; Australian Payments Clearing Association (APCA) chief executive Leila Fourie and eftpos chief product officer Marie Kellett.  

RBA’s Richards opened the discussion by providing the latest findings from the central bank’s consumer payments survey. The survey is done every three years and records details about every transaction for a week. Conducted in November 2016, the results provided a “rich picture detailing the payment patterns” of Australians. Over 1,500 people participated in the survey recording around 17,500 payments. 

The most obvious finding was the increasing adoption of electronic payments. Cheques now account for only 0.2 per cent of payments. While more small payments are being made with contactless ‘tap and go’ cards, cash is still often used for lower-value transactions and accounts for a significant share of payments for some segments of the community - most notably among older Australians and those on lower incomes. 

“These trends reflect both technology changes and household preferences. We will continue to see a significant change in payments,” Richards said.

He noted that cash - while still important - is declining and the growing threats of fraud in card-not-present transactions. He also acknowledged the government's decision to introduce open banking will have implications for the payments industy.

“Managing digital identity therefore will become even more crucial particularly around data sharing and the move to a faster payments network,” Richards said.

Financial services passport 

Developing a digital identify solution will be a key priority for APCA. Highlighting industry research, Fourie noted that over the past year, credit card transactions totaled $703 billion and, of that, $525 million was attributed to fraudulent transactions. Around 77 per cent of fraud is now committed online. 

Among the initiatives to tackle digital identity, APCA is working with merchants to address both fraud detection and authentication. The association is also working with the banks to develop digital identity solutions, including the possibility of a financial services passport. 

“We are now in the process of developing a potential framework for a financial services passport that will be important to enable innovation and payments to be made in a safe way,” Fourie said. 

Echoing Richard's views, Fourie also noted that a digital identity solution was crucial as the industry moves to open banking and data sharing. 

Kellett highlighted the importance of finding effective fraud mitigation solutions given the high level of transactions processed by the payments provider. With six million transactions conducted a day, eftpos is focusing on “removing the risk in its card numbers to provide extra security”. 

“Next year will be important for us as we move increasingly towards mobile payments,” she said. 

Novatti’s Cook acknowledged that fintechs like themselves needed to be licensed in order to address compliance and risk issues.  

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