Federal Reserve to initiate study on fraud in U.S. payments system

The Federal Reserve is expected to initiate a new study as a means of measuring fraud in the U.S. payments system and its associated costs while also identifying contributing factors.

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Officials said the Boston Consulting Group (BCG), a global management consulting firm, would conduct the study, as part of the Federal Reserve’s ongoing effort to improve and support payment security throughout the industry. The Fed released a paper last year outlining strategies for implementing safe, ubiquitous real-time retail payments and enhancing the safety, efficiency, and resiliency of the U.S. payment system.

“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,” said Ken Montgomery, the Federal Reserve’s payments security strategy leader and chief operating officer of the Federal Reserve Bank of Boston. “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.”

BCG was chosen to conduct the survey through a competitive bidding process that considered a number of factors, officials said, including expertise, ability to conduct an independent assessment and proposed assessment approach.

The study is expected to be completed in four to six months, as officials noted the probe would systematically and objectively measure payment fraud and identify and provide insight on payment security vulnerabilities.