Fast payments and tokenisation: bridging innovation with security

Fast payments systems can introduce new fraud risks that need to be addressed, especially since, according to SWIFT¹, 90 per cent of its payments already settle within an hour, Rod Francis, Partner at Oliver Wyman Financial Services and an anti-financial crime expert, told Sibos 2024 attendees in Beijing. While fraud has always been a part of payment systems, the changing landscape demands a closer look at what makes these risks distinct.

How is Australia positioned?

Australia’s entry into the real-time payments space has been marked by both opportunities and challenges, Ethan Teas, Executive General Manager of Payments at CommBank, told Sibos at the Stopping faster payments from becoming easier fraud session.

Teas highlighted the dual-edged nature of real-time payments: "Customers love them, and corporates are starting to embrace them – but criminals love them even more. They exploit the system by making multiple payments in rapid succession, settling quickly, and finding ways to exit the financial system."

"We have had a strong learning curve on NPP, but see endless potential for critical use cases both domestically and internationally," Teas remarked, reflecting on the country’s learning curve. Until as recently as 2021, fraud involving authorised push payments (APP) and scams remained largely theoretical in broader discussions. The release of the Report of the National Anti-Scam Centre on scams activity 2023 revealed $3.15 billion in reported scam losses in Australia in 2022.

A collective response

Despite early challenges, Teas shared optimism about the country’s collective and accelerated response. By 2023, the combined losses reported were $2.74 billion (a 13 per cent decrease in losses), according to the same report. "The positive takeaway is that the ecosystem will come together," he said, pointing to collaboration with telcos and big tech as a critical step forward.

In its annual targeting scams activity report², the National Anti-Scam Centre said that harnessing expertise across “all parts of the ecosystem and working together” makes Australia less attractive to scammers and protects citizens from their criminal enterprises.

"Australia is leading the way by involving telcos and big tech," Teas told Sibos, adding that initial efforts have created meaningful progress despite an uptick in scam incidences.

"Scam incidences are up, but the dollar value of losses has decreased significantly – a big win," Teas said, noting the industry’s next challenge is improving mechanisms for recovery and finality.

Defining and addressing fraud

A key enabler for effective fraud risk mitigation is adoption of a unified framework for discussing and combating fraud, according to Hays Littlejohn, CEO of EBA CLEARING. Littlejohn advocated for the development of a "lingua franca" (or common language) for fraud discussions, highlighting the Euro Banking Association's fraud taxonomy as a model. This taxonomy provides a standardised vocabulary to describe various fraud types, such as romance scams and CEO fraud, enabling stakeholders to communicate effectively and collaborate on mitigation strategies.

"Scam incidences are up, but the dollar value of losses has decreased significantly – a big win."
- Ethan Teas, Executive General Manager of Payments at CommBank

Ritu Sehgal, Managing Director, Head of Transaction Services and Trade, Corporate and Institutions at NatWest, highlighted two main types of fraud: unauthorised fraud, where payments are made without the account holder’s involvement, often via phishing, and authorised scams, where account holders are tricked into sending money through social engineering. 

"Unauthorised fraud has decreased as banks implement stronger security measures like robust customer authentication," Sehgal observed. However, she warned that authorised scams are on the rise, with fraudsters leveraging advanced technologies, including artificial intelligence and deepfakes, to manipulate victims.

Information sharing infrastructure 

Teas covered different levels of information granularity needed to be effective in risk mitigation. "For the hotspots, information sharing is essential because it helps us educate stakeholders and direct resources – like firefighters going to where the fire is. But fine-grained information is even more critical," he explained.

Teas highlighted a shift in payment patterns, where more activity now occurs before the payment is sent. This shift underscores the value of fine-grained data, where data is comprised of smaller components, which provides richer context and enables more precise intervention.

"Following the UK, Australia is running towards Confirmation of Payee. We’re aiming to implement that early to mid-next year," he noted. Teas also shared insights about CommBank’s NameCheck* system, which matches the beneficiary’s name to the account – even across institutions – and makes this functionality accessible via API to others. He explained how this innovation demonstrates a path for financial institutions, private parties, and industry participants to work together to provide greater transparency and context around payments.

However, Teas stressed that collecting information is only the first step. "The question is: what do you do with this information?"

G20: harnessing insights to track progress

Transparency in cross-border payments hinges on information-sharing tools like the SWIFT gpi Tracker, a cornerstone for providing clarity on payment timelines, statuses, and fees, according to the Collaborating to achieve the G20’s goals Sibos session. "The gpi Tracker remains the baseline," said Philippe Depasse, CommBank’s Senior Product Owner - International Payments, highlighting its availability as both a public and integrated tracker within banking channels.

"You can use the information extracted from the gpi Tracker to create a series of dashboards," Depasse explained, referencing CommBank’s ongoing pilot of G20 dashboards. These dashboards, integrated within the gpi observer analytics suite, enable users to pinpoint where their payment flows stand, extract actionable insights, and assess alignment with G20 targets. "This is where it becomes really useful, as I can report to management and check if we’re aligned with G20 targets or not," he added.

Despite the tool’s capabilities, Depasse underscored the gap between current progress and the 2027 objectives outlined by G20 leaders. "I agree with [panellists] that we’re still far from meeting the objectives for 2027," he said, emphasising the need for market infrastructures to play a greater role.

One key improvement, Depasse argued, lies in making gpi Tracker updates mandatory across the global banking system. "For some initiatives, updating the gpi Tracker isn’t systematically mandatory, but I believe it should be. Since we’re using this system globally, updating it should be a no-brainer," he stated.

Tokenisation & new market opportunities

Tokenisation is rapidly transforming the financial landscape, with projected volumes reaching $16 trillion by 2030, Sibos heard at the Towards a tokenised future panel. By digitising assets, tokenisation offers new sources of capital, increases liquidity, enhances portfolio construction, and improves operational efficiency through smart contracts.

A critical question panellists considered is whether tokenisation will foster convergence between digital securities and digital currencies. This potential for streamlined securities settlement cements the need for consideration of speed vs safety tradeoffs by financial institutions well into the future.

Bridging the delta

Sophie Gilder, Managing Director of Blockchain & Digital Assets at CommBank, shared insights into client attitudes, and concerns, about tokenisation. "Our clients range from institutional to retail, but they don’t care about tokenisation itself – they care about the benefits it delivers," Gilder explained.

Clients’ questions often depend on their familiarity with the technology. "Are they still learning about tokenisation and distributed ledger technology (DLT)? Are they experimenting? Or are they ready to deploy?" she asked.

In efficient markets like Australia, the focus shifts to the delta between existing systems and what tokenisation can offer. "They ask questions like: How does this impact custody needs? Do I need to rewrite my risk policies? Is it more secure or just differently risky? And how much more efficient is it, really?" Gilder said.

However, the biggest hurdle is the cost-benefit analysis. "Clients struggle to quantify the gains. Until markets operate at scale and the benefits are clear, it’s hard for them to evaluate the investment," Gilder noted. Timing is another major concern. "There’s uncertainty about whether being a first mover offers any advantage. Early adopters might end up on the bleeding edge, investing in something that doesn’t meet expectations," she added.

The hesitation to adopt tokenisation underscores the need for proven, scaled markets to build confidence. "When markets demonstrate success, that’s when clients will feel comfortable committing," Gilder concluded.

Asia-Pacific: a region of contrasts 

Luc Renade, CEO of Southeast Asia at BNP Paribas Securities Services, offered insights into the unique dynamics of the Asia-Pacific region. "In Asia-Pacific, we face different challenges as well as different opportunities. Tokenisation in this region is often led by government initiatives," he remarked.

The region’s fragmentation presents a significant hurdle, with diverse infrastructures and competing priorities vying for flows and liquidity. "This isn’t Europe or the US; we’re dealing with many different infrastructures and competing identities," Renade explained.

When markets demonstrate success, that’s when clients will feel comfortable committing.”
- Sophie Gilder, Managing Director of Blockchain & Digital Assets at CommBank

However, the region’s demographics present a significant opportunity. "There’s a very strong demand from retail investors here compared to Europe and the US. This is because the region has a large population of young, tech-savvy, risk-taking, financially interested individuals," he said.

Renade pointed to China’s rapid transformation over the past 15 years as evidence of how quickly innovation can take hold in the region. "It’s remarkable to see the shift – from a cash-heavy country to a largely cashless society. This demonstrates how quickly things can evolve in the region," he concluded.