Jeff Hallenbeck thinks the Federal Reserve’s new instant payment rail FedNow is in for an up-and-down 2024.

He expects it will be used for business-to-business payments as well as fraudsters testing a new channel for illicit gains. Hallenbeck works as head of financial partnerships for Forter, a New York-based company that provides fraud prevention services to businesses at the point of sale.

Payments Dive spoke with Hallenbeck Wednesday about the current state of payments in the U.S., particularly about peer-to-peer payment platform Zelle, the new instant payment rail FedNow and the Consumer Financial Protection Bureau’s moves toward an open banking system.

Editor’s note: This interview has been edited for clarity and brevity.

PAYMENTS DIVE: Back in July the Federal Reserve launched FedNow, an instant payment rail. There’s been criticism that adoption has been too slow. What do you think will happen with FedNow in 2024?

JEFF HALLENBECK: FedNow is really interesting. There are some early adopters out there. It's my opinion that it’s more of a business-to-business play at the moment than business-to-consumer. So it'll be interesting to see 2024 as cost competition really comes to the forefront for the merchant side of the world. But you look at a new rail, and just if you take out the payments component, any new technology is going to get pressure-tested by fraudsters, by bad actors, and I think FedNow is going to see that roller coaster happen in 2024.

If a FedNow transfer goes wrong is the rail set up to get you your money back? 

Not at the moment, no. FedNow is gonna have to figure out how you deal with poorly typed information, first-party fraud, all of those use cases. And not having the operational infrastructure behind it scares people. I think that's part of the B2C problem. What happens when something goes wrong? ACH, you could put in that same bucket. There's that three-day window with ACH where the money could vanish. There's really no clawback for a merchant to go get it. So merchants tend to be scared of ACH scenarios. 

What do you think about the Consumer Financial Protection Bureau’s recent moves toward open banking?

Europe is kind of leading this approach to open banking. How do you write regulation and protect customer data, while also ensuring everyone who needs to assess risk has the data they need? It's uncharted waters here in the U.S. But again, I think it's the right space to be in if you think about a future five years from now where my bank can protect me from fraud because it knows my devices, it knows my locations and knows my family members. That's probably the world that I'm OK living in. But as a consumer, I need to make sure that my data is protected as well. And that's the space we're in right now.

Is the lifetime value of a customer driving the decision by Early Warning Services, parent to peer-to-peer payments tool Zelle, to provide refunds to customers?

If you dive into the Zelle announcement it's not all scams. They're very selective about the verbiage they use around when they will refund. And I think that's really where the line gets drawn of, “How often? How frequent? What's your history? How much do we know about you?” All of those things come into a decision that everyone's going to have to make now. You’ve got to look at the lifetime value of that identity to your organization.