" class="no-js "lang="en-US"> Who should be held responsible for losses to Authorised Push Payment Scams?
Friday, April 19, 2024

Who should be held responsible for losses to Authorised Push Payment Scams?

The Fintech Forecast with ACI Worldwide

The Fintech Forecast is a series of guest articles published each month from thought leaders at ACI Worldwide

Author: Elise Thrale

When talking about trends in payments at the moment, fraud and payment scams are on everyone’s mind. Even outside of the world of payments, it is a hot topic and something consumers are dealing with daily. Victims are losing money globally in the billions, and not getting reimbursed, but who is truly responsible?

Where banking fraud prevention technology has become advanced, criminals are looking to exploit the weakest link in detection and have turned to coercing individuals into transferring them funds. The vast scope of the epidemic can be seen in the numbers: 27% of all fraud committed globally in 2022 was APP (authorised push payment scams) compared with just 14% in 2021, according to new data by ACI Worldwide and Global Data.

The scam epidemic

The top three global scam types include product scams, romance scams and investment scams. This signals that more individuals are resorting to scams to make money and consumer vulnerability is heightened by the current macroeconomic conditions, in which inflation, high interest rates and layoffs are putting consumers under economic pressure.

Much of this activity is happening virtually – according to Barclays – 77% of scams are now happening on social media channels, online marketplaces and dating apps. TSB has found that impersonation scams on WhatsApp had tripled within just one year, while fake listings on Facebook marketplace had doubled, placing pressure on social media platforms to tighten efforts on blocking scams. Additionally, around 2/3 of Britons were targeted by suspicious calls and texts according to British media regulator, Ofcom.

Despite the increased exposure to scams for consumers in the online world, the pressure is being felt mostly from banks on taking responsibility for reimbursing victims, rather than telcos or social media companies.

A step in the right direction

APP fraud totals 40% of all crime in the UK. As such, the UK government is looking to crack down on scams and have just launched a new fraud strategy, which will ban cold calls for financial services and mass texting technology. The market is also looking to unblur the regulatory grey area by creating shared accountability on the financial institution from which the payment was initiated and the financial institution which received the payment. The Payment System Regulator (PSR) has proposed a 50/50 split in liability unless the bank is found to have failed to make actions to protect the consumer from scams, in which case, they would take a greater proportion of the accountability for reimbursing the victim.

This is an important step in the right direction, as a huge element missing in the fight against scams is collaboration. Where historically, the initiating bank has been more likely to be liable for fraud losses, the receiving bank may have a view of a usually stagnant account receiving a large volume of payments from accounts it has never received money from before. If this comes into effect, it will hopefully give banks the push needed to increase the sharing of fraud risk signals across networks to keep better track of fraudulent activity.

Passing the baton

Another scam hotspot, Australia, has been assessing what can be done to save Australians from the  $3.1bn in scam losses in 2022. In a recently published report from the Australian Securities & Investments Commission, it found that despite investment from top Australian banks in stopping scams, there was no enterprise-wide strategy, and reimbursement of victims ranged from as low as 2-5%. This means that consumers are losing billions of dollars to scams, and are bearing the brunt of the issue.

But who should be liable for compensating consumers for losses? Telcos in the market have been found to have inadequate systems to prevent scammers sending out mass texts and social media is being called out for its part in not cracking down on scammers’ ads. Australia’s financial services minister, Stephen Jones is looking to create a cross-industry code to share accountability across social media, telcos and banks.

While banks can certainly do more to collaborate and take down scammers across the enterprise, from all angles of a transaction, whether they are initiating or receiving it, they are not fully responsible for the APP scam epidemic. Fraudsters will always hone in on the weak spot – and social media companies and telcos have a part to play in allowing fraudsters access to impressionable consumers. Stopping scams will be a cross-industry effort, but will need to be led by regulatory and government bodies. We are seeing progress, but it is only the beginning.

People In This Post

Companies In This Post

  1. Versapay Appoints Ed Neumann as Chief Financial Officer Read more
  2. WorldFirst Unveils Global Sourcing Payment Solution WorldTrade, to Facilitate Secure and Fast B2B Trade for SME Buyers Read more
  3. Klarna and Milkywire Open Global Biodiversity Fund to Other Companies Read more
  4. How Do We Create More Inclusive Fintech Companies? | FF News at MPE 2024 Read more
  5. Alkami Launches SDK Wizard “Merlin,” Furthering the Company’s TechFin Initiative Read more