Fraud detection and dispute resolution in the Instant Payment System

Categories : Blog


Author: Girum Fekadu

Instant payment systems are becoming more popular and convenient for consumers and businesses alike. They allow for fast and secure transactions that can be done anytime and anywhere. However, they also pose some challenges and risks, such as fraud and disputes. In this edition, we will share with you some of the latest developments and insights from the field of instant payments.

Fraud detection is the process of identifying and preventing fraudulent transactions in an instant payment system. Fraudsters may try to use stolen or fake identities, cards, or accounts to make unauthorised payments. They may also try to manipulate or deceive the system or the users to gain access to funds or information.

Dispute resolution is the process of resolving conflicts or disagreements that arise from an instant payment transaction. Disputes may occur when a user claims that a payment was not authorised, not delivered, or not as expected. They may also occur when a user wants to cancel or reverse a payment that has already been processed.

One of the main challenges of fraud detection and dispute resolution in an instant payment system is the speed and finality of transactions. Unlike traditional payment methods that have a longer processing time and a possibility of reversal or chargeback, instant payments are irrevocable once they are authorised and confirmed by both parties. This means that there is less time and opportunity for detecting and stopping fraudulent transactions before they are completed, and more difficulty and complexity for resolving disputes and recovering funds after they are settled.

Therefore, it is essential for financial institutions, payment service providers, merchants, and consumers to adopt best practices and strategies for fraud detection and dispute resolution in an instant payment system. Some of these include:

  • Implementing robust authentication and verification methods for both parties involved in a transaction, such as biometrics, one-time passwords, device fingerprinting, etc.
  • Using advanced analytics and machine learning techniques to monitor transactions and identify patterns and anomalies that indicate fraud or suspicious behaviour.
  • Leveraging data from multiple sources and channels to gain a holistic view of customers’ profiles, preferences, behaviours, and risk levels.
  • Establishing effective collaboration and coordination amongst all stakeholders involved in the instant payment ecosystem, such as regulators, law enforcement agencies, industry associations, dispute resolution bodies, etc.
  • Developing clear and consistent policies and procedures for handling disputes and claims related to instant payments, such as defining roles and responsibilities, setting time frames and deadlines, establishing communication channels and escalation paths, etc.
  • Educating and raising awareness amongst users about the features and functions of instant payments, as well as the potential fraud scenarios and prevention measures.

By following these best practices and strategies, we can enhance the security and trustworthiness of instant payments, while also ensuring a smooth and satisfactory user experience. We hope you find this edition informative and useful. Please feel free to contact us. Thank you for your attention.


Girum Fekadu Diriba, CDFP

Internal Auditor at EthSwitch S.C

DFI Alumni and Community Member