Fraud and associated costs in the U.S. payments system, as well as causes and contributing factors to fraud, are the focus of a study the Federal Reserve is beginning this month with the goal of improving and supporting payment security throughout the industry, the Fed announced Thursday.
The study is one of the “next steps” outlined in the Federal Reserve Next Steps in the Payment Improvement Journey paper released last year.
The study, which the Fed expects will be completed in four to six months, will be conducted by The Boston Consulting Group (BCG), a global management consulting firm. “The study will systematically and objectively measure payment fraud and identify and provide insight on payment security vulnerabilities,” the Fed said in a press release. “The Federal Reserve expects the results of the study will help inform its ongoing collaboration with the industry to enhance end-to-end payment security.”
The release says BCG was chosen through a competitive bidding process that considered a number of factors including expertise, ability to conduct an independent assessment and proposed assessment approach.
In last year’s paper, the Fed said its study will look at payment system security vulnerabilities and costs and benefits of various approaches to mitigate those. “A systematic and objective analysis that identifies and prioritizes payment security issues, defines potential costs and benefits of mitigation, and assesses stakeholder impact will be valuable in measuring outcomes and in better understanding stakeholder incentives to implement improvements,” the paper states.
Thursday’s release quotes Ken Montgomery, chief operating officer of the Federal Reserve Bank of Boston and the Fed’s payment security strategy leader. “The vast number of participants and complex nature of the payments industry make it challenging to determine where the greatest opportunities exist for significantly mitigating fraud,” Montgomery is quoted saying. “We hope to bring greater insight to the challenge with a comprehensive view of payment fraud data and payment security vulnerabilities that will help inform next steps for ongoing industry collaboration.”