Potential Settlement risk associated with some ANZ payments
Background: More attempted fraudulent transactions
New Zealand banks are reporting an increase in attempted fraudulent transactions. Many of these are due to the theft of bank customers’ usernames and passwords obtained fraudulently by phishing scams, phone scams, text scams or other illegal means.
New Zealand bank process:
All banks take measures before processing electronic transactions to identify fraudulent transactions. Transactions that do not pass a bank’s anti-fraud measures are stopped before acceptance for payment and processing. If a POLi transaction is involved and is considered fraudulent, the transaction will fail. The POLi status is delivered to the merchant as “Failed”.
However: In some cases, ANZ issues POLi with a receipt and then stops the payment
We have seen examples where the ANZ Bank accepts the payment and processes the payer’s debit transaction by debiting your customer’s bank account. At that point, the transaction is considered “paid” in terms of banking industry practice and the POLi status is delivered to the merchant as “Completed”.
Then, if ANZ Bank deems the payment fraudulent and the credit has not been transferred to the payee’s (POLi Merchant’s) bank account, ANZ reverses the debit payment.
This means there is a possibility a customer transaction that has been debited to your customer’s bank account and “Completed” in POLi may still be reversed by ANZ Bank if it is subsequently suspected to be fraudulent.
Despite the transaction status being reported as “Completed” in POLi, the debit to your customer’s bank account will be reversed and you will not receive the expected credit payment in your bank account.
Perspective: Few transactions stopped
To put this into perspective, about 40,000 ANZ Bank transactions a week are processed via the POLi platform. The number of suspected fraudulent transactions reversed by ANZ Bank is very small. From what has been reported to us this mostly affects high-risk merchants, but there is recent evidence that merchants in lower-risk categories could also be affected.
Our advice: Consider if you need to implement additional fulfilment processes where payments are expected to be received from ANZ
We believe the ANZ is the only bank in New Zealand which operates in this manner where transactions are accepted for payment, partly processed and then reversed. All other New Zealand banks appear to issue a “Notice of Dishonour” when a transaction is accepted for payment and then needs to be reversed.
For most POLi merchants the risk is relatively low of experiencing the non-settlement of a POLi transaction with a “Completed” status.
As a matter of good practice merchants should be reconciling their bank account daily to ensure all bank payments are settling as expected.
If the non-settlement risk is deemed unacceptable by any merchant, measures should be taken to only provide goods and services once payments have been verified as paid and settled in your bank account.
This could mean delaying the fulfilment of goods or services until settlement is confirmed. Settlement delays have recently been eliminated and most POLi transactions now settle on the same day usually within two hours.
We note that irrespective of the transaction status reported by POLi, we do not guarantee that any transaction will be settled and that the merchant will receive payment.
We therefore recommend that merchants periodically review their risk management processes, particularly in respect of payments originating from ANZ Bank customers.
Merco Limited
14 January 2025