Humans are constantly seeking faster, better, and easier ways to accomplish tasks. However, is faster always better? And is the latest, greatest technology always the right one for you and your business?
With the latest advancements in payment transfers, vulnerabilities are being introduced into cybersecurity.
Stemming from the introduction of real-time payments (RTP), cyber hackers have shifted their focus from slower ACH transactions to real-time payments.
While consumers often assume that cyber insurance will protect them against wire theft and fraud, this is not always the case. Here we will look at the different payment transfer methods and outline how you can adequately prepare yourself and your business from losses and damages.
Real-time Payments (RTP) Vs. Automated Clearing House (ACH)
The growing popularity of real-time and faster payment choices is one of the most talked-about developments in the payments business.
When the Federal Reserve announced that it was working on FedNow, a real-time payment rail to compete with The Clearing House’s (TCH) RTP rail, interest in real-time and faster payments increased.
So what exactly is RTP, and how is it different from ACH?
Real-Time Payments
Real-time payments are not entirely new, but the technology supporting them is.
Real-time payments are payments made in real-time, meaning funds are immediately transferred from one bank account to another.
The main advantage of real-time payments is the speed you can transfer money while eliminating float for businesses.
ACH Transfers
The Automated Clearing House (ACH) network is a payment system where financial institutions act as automated agents to process electronic transactions between different banks.
While ACH transfers are faster than checks and paper-based bank transfers, they can take up to three days before funds become available for withdrawal or spending. This means that business owners with customers waiting on payments may lose valuable time when money could be made elsewhere if their accounts aren’t funded immediately after an invoice has been sent out.
By contrast, real-time payments happen instantly; this makes it easier for companies who need access to cash flow quickly without having to wait several days for their funds to clear through traditional banking.
Transfer Risk
While ACH and RTP transfers still have their respective place when dealing with financial transfers, understanding the risks that come with each payment choice helps businesses determine which is suitable for your company.
Transfer risk is the risk that the transfer will not reach its intended destination or that cybercriminals may intercept it.
ACH transfers are a great way to send and receive money quickly, but they come with risks as these transactions don’t happen instantly. If cyber hackers intercept your account number and password before you initiate an ACH transaction, then they can use this information to make fraudulent withdrawals from your bank account.
On the other hand, RTP transfers offer increased security because payments occur in real-time across financial institutions’ digital platforms instead of batch processing through traditional banking systems.
However, RTP is still vulnerable to cyber attacks such as phishing scams where cybercriminals trick users into disclosing personal data, leading to identity theft or fraud.
How to Protect Yourself From Transfer Risk?
The cybersecurity industry is one of the fastest-growing industries in North America. According to Dark Reading, the cyber insurance market will triple over several years, reaching nearly $8 billion.
With cybersecurity being such a broad industry, consumers often assume that cyber insurance will be enough to keep their transfers safe. However, this is often not the case.
Let’s start by looking into cyber insurance and what it does and what it does not cover.
What to Expect With Cyber Insurance Coverage
Cyber Insurance is designed to protect you against cyber-related losses. Think of it as cyber-life insurance. However, as with many insurance plans and policies, cyber insurance does not cover all aspects of cyber transfers.
With cyber insurance, there is some basic coverage that you should expect. Those include:
- Costs incurred due to the incident/compromise
- Costs associated with the communication
- Costs associated with legal fines, lawsuits, and settlements
- Costs related to response and recovery
What Cyber Insurance Doesn’t Cover
While cyber insurance has many benefits, it is essential to understand cyber insurance policies do not cover everything. Here are the areas that cyber insurance will usually not cover.
- Incident management costs, including the opportunity cost of future, lost profits if it’s due to an Advanced Persistent Threat (APT) or long-term consequences of a breach.
- IP theft might result in significant expenses or diminished value.
- Costs associated with enhancing and upgrading your systems and organization’s security in the aftermath of an event.
Alternatives to Cyber Insurance
While cyber insurance does have its use, other areas within cybersecurity provide safer ways to transfer money. One key industry that must protect its transactions beyond cyber insurance policies is the real estate industry.
Real estate transactions are a prime target for cybercriminals. Hackers can exploit a real estate agent’s email to send phishing emails to the buyer and seller to access their bank accounts, credit cards, or even personal identity information. This can lead to fraudulent purchases on homes, automobiles, credit cards—even children’s college funds.
A great way to safeguard your transactions is to be proactive about your financial transfers and use a platform or software that does more than just cover losses, such as paymints.io
The paymints.io Solution
Using a platform such as paymints.io is an excellent way to protect the payment transfers before a cyber insurance policy is needed.
Paymints.io uses industry-leading bank security software known as AES-256 to support the largest bit size for your transfer needs.
The current encryption standard, Advanced Encryption Standard 256 (AES-256), is based on the idea that large data blocks are difficult for humans to modify. This implies that smaller bits are automatically overwritten by larger ones, making it extremely difficult to break using conventional computing power.
This ensures the safety of the transfer and enables the reliability of online payments.
If you are interested in learning how to send your real estate payments safely, reach out to the experts at paymints.io today.
