Authorized push payments fraud (APP) to become a billion pound business soon
Since the upsurge in APP fraud reported by UK Finance in the first half of this year, forty-five million people have received a suspicious text message, recorded message or phone call in the past 3-4 months. (i) Unknown communication is the start of the fraud cycle and the scale of fraudster activity suggests at least a doubling of UK Finance’s record H1 2021 figure of £ 355million.
Given the size of the scammers and the increase in activity since late June and with slow, collective progress in preventing scammers, it would be predictable that the increases could be even higher.
Suppose the increases stay as they are within 18 months, the annual fraud losses are likely to be £ 2.4 billion. Victims will lose £ 1.7bn and banks will lose £ 0.7bn in repayments. Since 2019 and taking into account the increase in fraudulent activity until 2023, more than 1,000,000 people could be victims of a scam. Getting ripped off causes intense financial and emotional stress for families.
Progress in the area of fraud prevention and a more consistent refund policy is underway. The Payment System Regulator (PSR) (ii) outlined next steps for a broader implementation of Payee Confirmation (CoP) and voluntary CRM code enhancements. These measures are expected to be implemented in 2022.
PSR also called for:
Social media companies must step up efforts and prevent fraudsters from looking for victims using their platforms – criminals pay for deceptive ads and investments that appear to be regulated
Greater adherence to the voluntary CRM code to reimburse more victims
Prevent banking services offered to criminals by recipient account focus
The CoP is working and now the coverage needs to be increased in all banks.
A more generalized and consistent approach to reimbursement is needed. The average fraud case for a consumer is £ 3,000. As the cost of investigating a fraud exceeds £ 10,000, frauds of this magnitude will be written off immediately, barring extenuating circumstances. Each bank determines who is responsible for the loss of fraud and this ranges from less than 10% to over 90% of victims reimbursed. On average, once APP fraud occurs, the chances of being compensated by the banks are less than half of the amount lost.
The technology enables “fraud beneficiary exit” at sub-millisecond speeds, millions of times per second, in a cloud infrastructure that automatically adapts to changes in demand.
The next steps are to ensure people and businesses are protected from scams, banks and their regulators have an agreed understanding and operating model to protect themselves and their customers. Police and law provide protection against serial fraudsters.
Hopefully, PSR recommendations will be activated soon, providing better protection against scammers. Otherwise, the momentum of APP fraud will continue. If that happens, the above fraud figures and death toll could double by 2023.
(ii) https://www.psr.org.uk/news-updates/latest-news/news/cop-phase-2-response-to-call-for-views-and-app-update-oct-21 /