Some estimates put fraud rates on P2P payments in the range of 10-100 basis points of all transaction dollars. That's significantly higher than the estimates of 7-20 basis points for credit cards. When you combine high fraud rates with the rapid growth of P2P payments, that's a exponential increase in risk. A 35 basis point loss rate means $1 Billion in annual losses.
Customer education is key, but hard to execute effectively. Getting clients to quit using P2P payments with strangers would eliminate a lot of fraud. Another practice customers should avoid are using P2P services to purchase products.You can also encourage clients to double- and triple-check username, address, and phone number of the recipient before sending, and to enable the PIN capabilities on their P2P app.
On the bank side, here are some things that will help reduce fraud:
- Customer education
- Implement daily limits and transaction size limits
- Use fraud scores to detect suspicious payments
- Use digital identity tools, such as device ID
- Use transaction monitoring rules
Robust transaction monitoring will detect some potential fraud types by identifying transactions outside of normal account patterns. This would include a low activity account suddenly engaging to P2P transfers; unusually high dollar transfers, especially to a new recipient; and a change in contact number/method followed by payments originated from a new device or to a new payee.
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