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Strong Customer Authentication Drives 4% Decline in UK Fraud Losses

Financial services industry initiatives helped drive down fraud losses in the United Kingdom in 2023.

Criminals stole about 1.2 billion pounds (about $1.5 billion) through fraud that year — a figure that was down 4% from 2022 — UK Finance, a trade association for the banking and finance industry, said in a Wednesday (May 22) press release.

“The financial services industry remains at the forefront of efforts to protect customers, prevent fraud and support those who fall victim,” Ben Donaldson, managing director of economic crime at UK Finance, said in the release.

Unauthorized fraud losses across payment cards, remote banking and checks totaled 708.7 million pounds (about $899.5 million) in 2023, while authorized push payment (APP) fraud losses amounted to 459.7 million pounds (about $583.5 million), according to the release. Those figures were down 3% and 5%, respectively, from the previous year.

One of the main contributors to the drop in unauthorized fraud losses is the rollout of Strong Customer Authentication (SCA) over the past two years, the release said. By verifying customers’ identity, SCA has helped to reduce remote purchases losses involving payment cards.

With Strong Customer Authentication, consumers who make purchases online or use contactless payments in stores must be authenticated with two-factor authentication (2FA).

While overall unauthorized fraud losses fell, Card ID theft increased in 2023, with criminals using personal information and stolen card details to either take over existing accounts or apply for new credit cards, per the release.

The drop in APP fraud losses during the year was driven in part by a reduction in the number of cases in which criminals impersonated a bank or the police and convinced someone to transfer money to a “safe account,” according to the release.

UK Finance attributed this drop to a “significant investment” made in warning consumers that banks don’t make those requests.

Losses to two forms of APP fraud increased during the year, however. These include purchase scams, in which people pay for goods that are never delivered, and romance scams, in which victims are tricked into believing they are in a relationship, per the release.

Pedro Barata, chief product officer at Feedzai, the fraud and financial crime solution provider that sponsored the UK Finance report, said in the release that the financial services industry should continue to work together to stop fraud.

“Scam mitigation has never been more important and although it’s promising that there’s been a slight decrease in the amount stolen through fraud compared to last year — there’s clearly more that can be done to protect consumers,” Barata said.