Consumers are going online to complete their shopping during the pandemic — even for major purchases typically done in person, such as buying a car. Shoppers who have become accustomed to quick-moving digital transactions may find it all the more painful when their auto financing disbursements take days to arrive, however. Those who were happy to wait days to receive checks in the mail or for ACH transactions to settle are now likely to regard these delays as unnecessary frictions in their car-buying journeys.
Many consumers are therefore eager for auto financing to be as swift as possible, and companies like auto financing provider Westlake Financial see disbursements delivered over the RTP(R) network as the future of the industry. Westlake has already sent several million dollars over the RTP network during the pandemic, according to Westlake’s Director of Accounting Operations Raul Alvarez.
Accelerating auto financing disbursements to real-time speeds takes careful planning and preparation, however. As with any payment method, fraud attacks and human errors can upend customer experiences unless companies have strong security strategies in place. Alvarez explained in a recent PYMNTS interview how effectively securing real-time transactions requires thorough contingency planning and advanced customer verification methods.
The RTP network is a powerful tool, but any tool must be wielded properly to have its desired effect. Westlake spent a month and a half testing use cases and troubleshooting fraud scenarios before it was well aware that immediate payments could bring reduced administrative costs, rapid speeds and 24/7 year-round availability, but such transactions are also nearly irreversible, adding complexity. Payments sent to the wrong account by mistake or as a result of a fraudster’s scam cannot simply be canceled before the funds settle.
“We know that real-time payments are a type of payment that’s more of a wire — it’s very tough to get the funds back,” Alvarez said. “We can’t pull them back as you would do with ACH or anything else. You can’t put a stop payment [like] on a check. The level of risk is higher.”
That made it essential for Westlake to ensure that it had all of its security measures in place to block fraudsters. It also had to prepare contingency plans for how to respond should bad actors slip through or should technical difficulties or human errors interrupt smooth use of the faster payments network.
“There was a lot of risk assessment: ‘What happens if this happens? What if that happens?’ And we had to make sure we had contingencies in front of us before it really happened,” Alvarez said.
The thorough risk assessment required envisioning possible problematic scenarios, such as funds being delivered to the wrong customer account. Alvarez gave a hypothetical example in which auto financing loans were sent to a married couple, but were delivered into the wrong spouse’s account. The company, through an arrangement with its bank, Wells Fargo, can now examine potentially misplaced RTP transactions, reclaim the funds from the incorrect recipients’ accounts and return them to Westlake, Alvarez said.
“If the funds go out over RTP [with] incorrect [account] information, Wells Fargo goes back and looks at the information we provided,” Alvarez said. “If, by chance, it went to the wife’s bank account instead of the husband’s, who was the primary account member, it actually goes back to us and we can send the funds again.”
Other contingency plans considered what to do if Westlake were to lose access to the RTP network. The firm accesses the real-time payment system via integration with an application programming interface (API) from its bank, and it had to consider what it would do in the unlikely scenario that it lost this connection mid-transaction, for example. That led to Westlake preparing internal systems so that an interrupted transaction would be switched over to customers’ preferred alternate payment methods, like ACH or MoneyGram.
Heading off problems before they happen is ideal, of course, and Westlake and Wells Fargo set up various protections to help anticipate potential issues. Westlake now uses an RTP pre-confirmation system through its bank that compares the account details that the financial institution (FI) has in its records for any given customer against those that Westlake staff enters at the point of sale (POS) before allowing the transaction to clear. This is intended to catch mistyped account digits at the POS and prevent those payments from going through.
“If I’m buying something on Amazon and put in my credit card number incorrectly by one number, it doesn’t let me do the transaction. We had to get that for RTP,” Alvarez said.
Good security also requires preventing RTP transactions from being delivered to scammers, as fraudsters who receive immediate funds can quickly vanish with them. Robust onboarding methods are therefore critical: Westlake requires users to confirm their identities through a variety of official documents and details, like Social Security numbers or passports. It has even reached out to personal references in some cases.
The company also examines historical data about applicants, such as their bank account balance histories and overdue bill payments. Details like these are not used to assess creditworthiness, but to instead get a better understanding of whether the behavioral patterns suggest legitimate customers or fraudsters. Artificial intelligence (AI) tools also help assess the many customer data points collected to determine the likelihood of fraud, Alvarez said. Should anything still go wrong, Westlake and Wells Fargo will work to quickly rectify the problem, and the issue will become another data point that the AI can use to make its fraud assessments more robust, he said.
Adopting new payment technologies is a powerful way to usher in more compelling customer experiences, but businesses must also innovate their troubleshooting and anti-fraud strategies to keep everything safe. Advanced intelligence tools, robust contingency planning and strong onboarding checks can be essential steps that pave the way for swift, secure payments.