A Closer Look at the Pan-European FPAD Initiative Against Instant Payment Fraud

The modern age is marked by payment technology evolution that is happening at an unmatched pace. However, while A2A transfers and instant payments are flourishing, so does the fraudulent activity. This is due to the fact that while the speed of such payment systems makes them convenient for the users, it also often means that the transactions are challenging to detect and reverse.

Jurisdictions across the globe are actively working on addressing this pressing issue. For instance, European banks are currently joining forces with EBA CLEARING to develop a new tool to combat fraud. It is called Fraud Pattern and Anomaly Detection (FPAD) functionality and its first modules are set to be rolled out already in November 2023. Read on to find out more about this promising solution!

FPAD Project in a Nutshell: Goals, Timeline & Participants

The new functionality in the making is EBA CLEARING’s step to ensure that both of these systems have what it takes to resist advancing fraud mechanisms. The development of the FPAD tool began earlier this year, following the release of a blueprint and consultations with RT1 and STEP2 users in Q4 2022.

This summer, EBA CLEARING engaged in data model training as part of the ongoing analytical pilot phase for FPAD with nine banks from six European countries. The key objective of this phase is to collaboratively develop models for identifying fraud patterns in partnership with users and to find a way to efficiently categorize anomalies based on their feedback.

Based on the findings, the payment infrastructure provider released the FPAD specifications in September 2023. At the same time, it also introduced a developer portal with a sandbox, aimed at assisting users in developing and testing FPAD’s application programming interfaces (APIs).

What is the Functionality of the FPAD Tool?

According to the recently published specifications, FPAD will encompass a wide range of real-time tools for preventing and detecting fraud. However, the features will be rolled out in phases.

Another useful functionality going live in November is the post-transaction investigation option. With its help, users can adopt a proactive approach to addressing issues that may arise after a payment has taken place.

The Key Benefits of the FPAD Tool

Even though the FPAD project is still only in its primary stages of development, industry experts agree that its future is very promising.

According to Jaco Struik, the global head of fraud services at ING, the bank’s participation in the FPAD design and analytical pilot phases has been extremely rewarding. He believes that this solution will offer valuable insights that can only be derived from a network perspective.

Raphael Barisaac, the global head of payments and cash management at UniCredit, also mentioned FPAD’s significant investment in the future of security and fraud prevention measures for instant payments. He particularly emphasized the efficacy of the systemic approach in elevating fraud-fighting capabilities within the SEPA region.

It is also clear that the FPAD solution has the potential to bring massive benefits to European financial institutions, PSPs, businesses, and consumers, including:

• Comprehensive fraud detection
• Improved regulatory compliance
• Data-driven payment insights
• Collaborative system improvements
• Adaptability in responding to emerging cybersecurity threats

What’s more, this pioneering initiative is expected to establish a benchmark and a best-practice model for other payment solutions around the globe.

The Future of the FPAD Project: What What to Expect?

As of now, EBA CLEARING has not yet published any information regarding the release of the FPAD tool’s additional functionalities. However, it is safe to assume that the results of the primary launch will be closely monitored and user feedback will be carefully analyzed to gain actionable insights for the next steps.

Overall, the FPAD initiative’s ambitious payment security goals, smart user-focused approach, and impressive network of reputable industry players are creating a solid foundation for an enhanced and resilient European fraud prevention and detection framework.