BNY Mellon combats digital payment fraud with Early Warning partnership

July 2, 2020.

stepped up the anti-fraud measures built into its payment transfer system by partnering with Early Warning Services LLC, creator of the Zelle payment network, the New York-based bank said Thursday.

The investment giant with $1.9 trillion in assets moved to combat fraud in online payments, as businesses and banks continue their inexorable shift to digital transaction systems. Early Warning’s real-time account validation service will be integrated into BNY Mellon’s existing payment services to verify payees’ identities before their payments process. 

“The online channels don’t necessarily create more risk, however, they are easier to use and very fast and efficient to allow for a payment to be made and delivered quickly to the payee anywhere, in seconds,” explained Michael Bellacosa, global head of payments and transaction services, BNY Mellon. “The top fraud use case tends to be authorized parties who have valid credentials and are properly authenticated making payments to parties that have tricked them into paying to the fraudsters account.”

Early Warning Services works with many major banks through its anti-fraud services and Zelle Network payment system, which processes over $100 million each quarter. Its service, in addition to preventing fraud, can save banking customers fees associated with incorrect transactions, according to BNY Mellon.

This service, which will primarily benefit banks and companies that have accounts with BNY Mellon, "addresses an increasingly important need for clients who are seeking real-time account validation to further reduce the risk of fraud and misdirected payments—which reduces costs and delivers a better user experience for clients," said Lou Anne Alexander, chief product officer of Early Warning Services.

Bank fraud has been on the rise since 2015, with fraudsters employing a variety of tactics, such as submitting fake invoices, identity theft, card-not-present scams and cyberattacks. In 2018, banks spent $22.3 billion on preventing and handling fraud against deposit accounts and lost a comparatively small $2.8 billion to these fraud attacks.

Synthetic identity fraud, in which someone manufactures an identity, as opposed to co-opting an existing one, is a growing concern, and topped $1 billion in 2019.

The fraud detection market has been growing at a brisk clip, valued at just under $20 billion in 2018, and is expected to rise to $63.5 billion by 2023. Authentication services, like those offered by Early Warning, comprise the largest portion of this market.