Fraud Looms with Federal Reserve’s Instant Payment

Merchants applaud the Federal Reserve Board’s plans to develop a instant payment and settlement system.

Instant Payment

Brett_Hondow / Pixabay

HOWEVER: possible fraud problems should give pause.

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Q3 2019 hedge fund letters, conferences and more

ONE SIDE:

OTHER SIDE: 

  • 8% of all consumers had a card misused for CNP transactions (2017)—an 11% increase in incidence from the year before.
  • There is currently no clear-cut chargeback process for handling instant payment fraud.

Global fintech exec Monica Eaton-Cardone says that if consumers are unable to dispute and rectify fraudulent account activity, public trust in an instant payment system will plummet.

“First we need to establish consistent and fair standards for chargeback process and management. Only then can we start talking seriously about instantaneous payments really working.” ~Eaton-Cardone

Monica Eaton-Cardone has extensive experience developing agile technologies and products, optimizing ecommerce profitability, analyzing risk relativity, and creating payment processing solutions. She developed Chargeback911's robust chargeback-mitigation solution, which combines human insights with agile technology, that is now used by thousands of companies worldwide.

Monica Eaton-Cardone notes that we must ask the following questions about the instant payment proposed by the Fed:

  • What exactly is the Federal Reserve Board proposing?
  • How soon is FedNow expected to take effect?
  • Why are merchants so enthusiastic about the idea?
  • What is the expected friction with consumers?
  • What are the consequences of higher fraud and why?
  • How would instant payment complicate the handling of chargebacks?
  • Is there a consistent way of handling chargebacks?
  • What do we need to do to prevent a massive loss of public confidence in the system?



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver