The irrevocability of instant payments, whether through peer-to-peer or real-time channels, is shaping up to be a fraud risk, especially since users can willingly send money to scammers. 

Banks can, however, do more to warn consumers of scammers before they send funds, says Carl Slabicki, executive platform owner of treasury services at The Bank of New York Mellon.

It would be valuable if banks told consumers “we actually just recognized a really big scam because we took all this market data and we're going to use it to implement even more friction,” he said, speaking at a fintech conference hosted by Semafor in Washington, D.C. on Wednesday. Banks could do more in the way of sharing information to identify trends coming up in payment data to proactively warn customers, he added.

Bank responsibility for fraudulent transactions through Zelle, for example, is prompting scrutiny from legislators, with some institutions beginning to reimburse certain consumers who fall prey to imposter scams. 

They can do more to prevent these fraudulent transactions by implementing a more robust risk management framework and data-sharing protocols, principles outlined by the National Automated Clearing House Association, Slabicki said.

“Greater and better information sharing among financial institutions can be used to counter fraud in multiple ways: improved dissemination and awareness of fraud scenarios; communication and collaboration between participants on specific instances of fraud; and qualitative and quantitative data sharing on fraud patterns,” a 2022 Nacha whitepaper on the topic said.

Asked about the relatively slow uptake for FedNow, Slabicki suggested greater adoption will be tied to the promotion of instant payments more broadly — whether through FedNow or RTP, the real-time payments network operated by The Clearing House. 

Buy-in for instant payments, in the U.S. market, is complicated by a large number of financial institutions. Other countries, including Australia, Singapore and India, have a leg up due to a smaller number of banks that can push instant-payment adoption more quickly, he added.

“We really want to sell and promote the value of instant payments — network agnostic,” with use cases that include business-to-consumer disbursements, e-bills and account funding, Slabicki said. "We’re actually spending a lot of time bringing our clients, who are other banks, corporates, fintechs, to the table" on use cases for RTP and FedNow, he said.

The bank plans to take this feedback to the Federal Reserve and The Clearing House to advocate for a common instant payment user experience.

“You really do need [a] network effect for those types of use cases to flourish,” he said.

Instead of a dim view on instant payment adoption, Slabicki pointed out that 70% of U.S. accounts can accept an instant payment credit 24 hours a day.

“It’s actually pretty good adoption when you think about it,” he said. “The challenge is, there's a huge long tail of banks in the market that we're going to have to continue to work through to get to that aggregation point.”