Aug 03, 2013 Dave King
Electronic payments continue to become more popular among businesses and consumers, especially as the convenience and affordability of the associated technology have increased substantially. ACH cards and other automated payment methods are now becoming the most popular methods of bill pay, vendor transactions and even payroll.
However, while the convenience of these methods is too much to pass up, it has become clear that electronic payments come with substantial risks when not protected. Enterprises need to keep a close eye on accounts payable and receivable, while also using data security solutions, to keep internal financial records and accounts secure from hacks and wire fraud.
FTC weighs drastic measure
Manatt Phelps and Phillips, LLP, recently reported that the U.S. Federal Trade Commission is considering a measure that would prohibit the use of certain electronic payment methods. Should the organization pass the bill, retailers, telemarketers and a variety of other businesses and organizations would have to adjust payment processing policies and invest in new technology.
According to the firm, the proposed law would ban retailers and telemarketers from accepting remotely created payment orders and checks, which are becoming more common in the digital consumer landscape. Officials believe that this measure is necessary to protect bank account information, as well as the finances of businesses, from the hands of hackers and identity thieves.
The source explained that the FTC has filed several lawsuits against payment processing providers in recent months because it felt as though these companies were not implementing reasonably acceptable security measures. These cases become more common when a breach occurs, especially one that leads to incurred financial losses among consumers and businesses.
Manatt Phelps and Phillips, LLP, added that the Landmark and Automated Cases bill is specifically targeted at remotely created payment methods, which some telemarketers have started to make popular. The proposal came after lawmakers decided that merchants and processors were using unconventional tactics to try and boost sales, all the while putting individuals at risk.
The organization argued that the rule, while maybe necessary, might hurt innovation in the payment processing sector. Though fraudulent activity has become the target of increasingly stringent law creation and enforcement, many fear that the digital marketplace will be threatened by such actions in the coming years.
BankInfoSecurity recently reported that two U.S. banks were hit by a fraud scheme that the Federal Bureau of Investigation uncovered last month. According to the source, several executives from these banks believe that as many as 160 million payment cards have been compromised by the fraud scheme, while the two Russians suspected of carrying out the attack have been indicted.
Law enforcement officials, as well as Attorneys General for several states, believe that this latest attack is indicative of a dangerous trend in cyber crime, where hackers are shifting focuses to financial institutions and the system itself, rather than one business or single consumer.
It is clear that the U.S. needs more stringent protections in place to avoid hacking and incurred financial losses, though advocates believe that the laws will need to be agile enough to encourage further innovation among payment processors.