Why faster payments require intelligent risk management

Fintech is helping to build better payment systems for the U.S. marketplace:  

→ Stablecoins are moving from conceptual to real-world applications.

Stablecoins have found very real use cases as a productization of the US dollar. Their speed, low cost and programmability make them appealing, particularly for cross-border settlements and on-chain commerce.

→ Pay by bank is surging in both adoption and viable use cases. 

The ability to initiate payments using open banking APIs offers merchants an affordable, flexible money movement option. Pay by bank adoption is steadily increasing for use cases like bill payments, e-commerce, online gaming, marketplaces, and more.

→ Real-time payment networks are proving their worth. 

Instant payouts (credits) already enable businesses to send money in real-time for rewards, withdrawals and disbursements via the RTP network and FedNow service. 

Now, RTP pay-ins (debits) could be next; enabling instant payments from bank to bank  for both consumers and merchants.

→ At the same time, AI is optimizing everything.

95% of business leaders believe AI’s real-world capabilities will meet or exceed the current hype within the next 5 to 10 years.

AI is being layered into payments for compliance automation, advanced personalization, and improvements to the infrastructure and engines that facilitate, verify and protect transactions. 

Across these advancements, the theme is clear:  

The United States is ready for faster payments. And they’re here. ‍

But the big question is; How will faster payments effectively balance risk? 

This article provides an overview and explanation. 

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First, what’s the value of faster payments? 

In the payments ecosystem, speed means efficiency, accessibility, and control. What used to take days and depend on bank availability now becomes immediate. 

“The term 'faster payments' is broadly used in the payment industry to indicate simply that increased speed, convenience and accessibility are essential features for the future of the payment and settlement system.” — NACHA

Benefits of faster transactions include: 

• Inclusive payment options. Lali Shaffer, a payments risk expert at the Atlanta Fed, explained two specific barriers that instant payments can help address; high and unpredictable fees and faster access to funds. More on US financial inclusion here. 
• Cash flow and payment timing. Instant payments help consumers avoid overdrafts and late fees by timing transactions precisely. Businesses improve liquidity, streamline reconciliation, and gain better cash flow management.
• Fewer intermediaries. Traditional payments rely on multiple middlemen that can add cost, complexity and delays. Faster payment systems strip away many of these unnecessary layers.

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What do faster payments mean for risk? 

The faster money moves, the more payments are (potentially) exposed to risk. 

Stablecoins rely on ledger-based transactions without physical reserves, making the system fragile. One failed risk prediction can domino, causing system-wide instability.

And the immediate nature of real-time transactions raises concerns around fraud, return protections, and risk mitigation strategies. 

But risk doesn’t mean payments should slow down, it means risk intelligence has to keep up.

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Solving for risk means solving for scalability 

To unlock the value of faster, more immediate payments, there must be assurances that risk is properly managed and prevented. 

At Aeropay, we look at risk through the lens of four components: 

Data relevance and hygiene 

More data isn’t always better. Some companies tout massive data pools, but not all financial data is relevant for transactions.

Aeropay's network includes millions of end users and thousands of merchants. Aggregating information from the network’s user transaction and bank activity helps structure the right data parameters that are centered around a user's ability to successfully fund a transaction. 

Targeted transaction velocity limits

Aeropay's proprietary risk technology allows targeted control on deposit patterns to manage fraud, while maintaining high acceptance rates.

This allows businesses to customize thresholds like transaction limits to automatically flag abnormal activity without disrupting all users.

User recognition and intelligence

Recognizing transaction patterns across a shared network strengthens risk intelligence.

Aeropay's in-house solutions leverage intelligence from billions of transactions happening within our network of recognized users. This improves accuracy when verifying customers, approving good payments and identifying/blocking bad bad actors.

Aeropay can even approve users that other systems declined. This is done by understanding past behavior through connections within the broader network. Tracking users across transactions allows Aeropay to set a baseline level of risk for merchants and keep the right payments moving.

Tailored risk decisioning based on user relationship

Merchants already have trusted user groups operating on their platform, they could be VIPs or exclusive members that drive high repeat transaction volume. Aeropay can identify those users and enable them to transact at higher dollar volumes than the rest of the user base, optimizing for customer experience and high velocity.

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Takeaway

We’ve reached the tipping point for a revolution in U.S. payments, but what comes next depends entirely on the payment solutions brought to market.

Aeropay is dedicated to building fast, affordable, embedded payments for U.S. businesses. By design, each component works together to mitigate risk and match transaction frequency on your platform. 

As payments speed up (and more users inevitably adopt them), Aeropay’s risk approach will continue operating at our high standard. Transactions are protected with precision that’s backed by opportune data endpoints, AI, and interconnected network intelligence. 

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‍Learn more from a payments expert.

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