FedNow Fraud Working Group Update
In Spring 2021, the Federal Reserve held a series of working group sessions on proposed fraud mitigation capabilities for the FedNowSM Service. Key stakeholders from over 20 small, medium and large financial institutions and payment processors attended these discussions to contribute their ideas and expertise for fraud mitigation relating to instant payments.
The working group sessions focused on fraud controls, fraud reporting processes and advanced fraud detection tools under consideration. Participants provided valuable feedback on industry demand and prioritization for fraud mitigation capabilities planned for the FedNow Service at launch and as future enhancements. Key takeaways included:
- Insights on types of fraud controls that financial institutions would find beneficial for their organizations, such as size and configuration of a negative list which would block transactions by account.
- Strong interest in advanced fraud detection using machine learning as well as network controls, such as a FedNow network-level negative list.
- Benefits and challenges associated with different fraud reporting capabilities and practices, including operating rules, obligations, management and data fields. Participants generally advocated for sharing information as this would contribute to a more secure network and were already sharing with other services such as credit card providers or other faster payment rails. Reporting of fraud is anticipated to include reference to the transaction, type of fraud using the Fraud Classifier Model and which party is the bad actor(s), as an example.
The FedNow team is carefully reviewing recommendations from stakeholders across the FedNow Community.
For more information on FedNow Service features and functionality, download the FedNow product sheet (PDF). You can also stay up to date on our progress by joining the FedNow Community or by signing up to receive FedNow Service emails.