FedNow and Fraud Prevention: Closing the Security Gap in Real-Time Payments

Real-time payments are redefining speed… and risk.

How can U.S. banks and credit unions embrace FedNow without opening the door to fraud?

Adoption of instant payments (also known as real-time payments) is considered one of the key trends in the financial industry in the coming years. Global transaction volumes are projected to grow by 84%, reaching $100 trillion by 2029 according to Juniper Research study, with U.S. adoption accelerating through the Federal Reserve’s FedNow Service.

This infrastructure enables real-time transfers 24/7, positioning banks and credit unions to meet rising customer expectations and modernise their payment capabilities.

Yet this transformation comes with significant challenges. Fraudsters are quick to exploit the immediacy of instant settlement, moving stolen funds within seconds and leaving victims and institutions with little chance of recovery.

Zelle’s reported $1 billion in fraud losses illustrates the risks when security measures fail to keep pace with innovation. The phrase “faster payments mean faster fraud” has become a stark reality, underscoring the need for robust safeguards.

For U.S. financial institutions, the path forward is clear: embrace instant payments while prioritising fraud prevention. With 85% of banks and credit unions yet to implement instant payment solutions and many early adopters operating in “receive-only” mode, success will depend on deploying advanced technologies and rethinking processes.

FedNow has transformed the U.S. payments landscape by making instant settlement a reality. But speed alone does not guarantee security. The challenge for financial institutions is clear: fraud prevention must operate at the same pace as the payments themselves.

Where Legacy Tools Fall Short

Although FedNow has introduced risk management features to help financial institutions address fraud, the heavy lifting of protection still rests with the institutions themselves. To make payments not only instantaneous but also secure, banks and credit unions must reevaluate their fraud defenses, as legacy systems are rarely suited to the demands of real-time fraud.

The reason is simple: real-time payments move at a speed that requires fraud detection systems to identify suspicious transactions within milliseconds, often during the setup process before the payment is even executed.

However, the reality of legacy tools and processes is different:

• Traditional fraud reviews and manual checks are far too slow: Older systems may take seconds—or even longer—to calculate risk scores or trigger alerts, which is no longer acceptable when money moves instantly.
• Legacy systems rely heavily on historical data and static rule sets: Rigid thresholds, such as “block all transfers above $5,000 to new recipients”, lack sensitivity to modern fraud tactics like social engineering and remote access attacks, while also creating unnecessary friction for legitimate users.
• In many institutions, fraud frameworks and teams still operate on a business-hours model with batch reconciliation, next-day analysis, and manual queue reviews. This approach is insufficient in an always-on environment where payments happen continuously, day and night, including weekends and holidays.
• Traditional systems are primarily built to detect unauthorized access. Today’s fraudsters, however, increasingly rely on authorized deception, such as Authorized Push Payment (APP) scams. Systems must therefore recognize subtle behavioral and contextual signs of manipulation, even when a transaction originates from a legitimate user session.

How Behavioral Intelligence Strengthens Instant Payment Security

No surprise that deploying real-time fraud mitigation tools is a top priority for 78% of financial institutions in the U.S. Fraud prevention also ranks among the top areas where institutions aim to raise their standards.

Leveraging the latest technologies can be a powerful enabler in this effort. As Juniper Research notes, real-time, AI-powered algorithms can flag suspicious transactions while enhancing risk management, identity verification, and transaction monitoring. Growing prevalence of APP scams, the most common type of fraud today, also motivates financial institutions to take a holistic approach, recognizing that modern fraudsters exploit human behavior rather than system vulnerabilities.

Explore why scam prevention is changing

AI-powered behavioral biometrics has proven invaluable in this regard. Unlike traditional systems, it can analyze subtle behavioral patterns down to very granular data, such as keystrokes, touch, and mouse movement. By building a unique behavioral profile for each user, it enables highly reliable detection of anomalies and fraudulent activity – monitoring not only what happens during the session, but also how it happens.

ThreatMark’s Behavioral Intelligence Platform takes this a step further by combining behavioral biometrics with transaction monitoring, device intelligence, and threat data. This integrated approach allows for precise detection of all major fraud types, including social engineering and sophisticated fraud schemes, across all digital channels.

The Business Impact of Real-Time Fraud Prevention

Adopting real-time fraud defenses does not only mitigate risk but also brings significant business benefits.

Reduced fraud through real-time intelligence

Behavioral intelligence allows banks and credit unions to identify and stop suspicious activity before money leaves the account, which directly turns into a measurable reduction in fraud losses. For example, after moving from a top-tier provider, institutions that implemented ThreatMark have experienced a 63% drop in fraud losses.

Fewer false positives and smoother user experience

Traditional fraud systems rely on static rules and broad thresholds that can cause friction to legitimate users, especially in high-volume instant payment environments. Behavioral analysis replaces these rigid controls with contextual insights into each user’s activity. As a result, genuine transactions are approved instantly while suspicious ones are still stopped in time. This helps institutions cut unnecessary manual reviews and improve overall user experience.

Building stronger customer trust

Reducing the risk of fraud and delivering a smooth payment experience enhances customer confidence. Visible safeguards such as integrated scam detection tools reinforce this sense of security and transparency. For credit unions, the impact is even more personal. Offering modern convenience while maintaining a reputation for reliability and care deepens member loyalty and preserves the trust.

Lower operational costs

Accurate, real-time decisioning significantly reduces the need for manual reviews and post-transaction investigations. Automated analysis ensures that most transactions are handled instantly and correctly, leaving only a small fraction for human verification. This not only cuts operational expenses but also eases the load on customer service teams, since fewer clients need to call about blocked or delayed payments.

Regulatory and reputational resilience

Strong, proactive fraud prevention helps financial institutions stay ahead of evolving consumer-protection and liability requirements. Demonstrating the ability to prevent fraud in real time shows regulators that the institution is acting responsibly and transparently. It also reduces reputational risk, since banks and credit unions known for secure and well-managed payment systems are more likely to earn the confidence of customers, partners, and oversight bodies alike.

Achieving Speed, Preserving Trust

In the era of instant payments, real-time fraud detection is no longer optional or “just a compliance requirement”. It is a market differentiator. Institutions that invest in advanced, behavioral intelligence-driven protection are rewarded with measurable results, such as stronger fraud detection, fewer customer complaints, faster settlements, and ultimately higher trust.

For banks and credit unions, the shift to instant payments is an opportunity to raise fraud prevention to a new standard—one that protects not only instant payments, but every transaction, across every channel, and their entire customer and member base.