The Federal Reserve’s announcement last month that it would compete with private industry to launch a 24-hour-a-day real-time payment service has fintech experts raising an alarm: How will it handle fraud, which they say is inevitable with any financial system.
The Fed’s real-time gross settlement service, to be known as “FedNow,” is not scheduled to be available for at least four more years. Yet some financial services attorneys are already pondering who should bear the loss if it processes unauthorized payments.
Should it be the banks that unknowingly transfer the funds? The consumer in whose name the payment was made? A merchant who has unwittingly provided a service or product to a fraudster? The Fed itself?