Cross River What's Next in Credit November 2023 Banner

Bank Push Payment Scams Now 40% of UK Fraud

Great Britain’s smaller banks are apparently among the largest targets for payment fraud.

That’s according to a report issued Tuesday (Oct. 31) by the U.K.’s Payment Systems Regulator (PSR) examining the extent of authorized push payments fraud (APP). 

“This is the first time we can see at an individual level how well banks and payment firms are dealing with APP fraud,” Chris Hemsley, managing director for PSR, said in a news release.

“This represents a substantial improvement in transparency. This provides better information for customers on how firms handle APP fraud and encourages these firms to take more action to tackle it.”

APP fraud occurs when a criminal poses as a legitimate payee to trick someone into sending them money. The PSR has said these scams cost consumers north of $600 million per year.

The PSR says the report offers the most comprehensive data on APP scams published so far, covering 95% of payments made via Faster Payments in the U.K. It focuses on Faster Payments, as that is the most common avenue for APP scams.

The findings include Great Britain’s 14 largest banking groups, as well as data from 10 other companies that were among the 20 highest receivers of fraud. These smaller companies were included because “they represent a disproportionately high level of fraud received for their size,” the release said.

Among the lenders most targeted by APP fraudsters was Monzo Bank; the report shows that for every million transactions at the neobank last year, 141 were reported as APP fraud. Also on the list were Starling Bank and Metro Bank, where customers reported 127 cases of APP fraud.

Hemsley added that in the coming months, PSR will bring all payment firms into “new reimbursement arrangements” to provide more consistent protection.

“This is important because we can see from today’s report that this has not always been the case,” Hemsley said.

Ashley Hart, director of fraud and disputes at Monzo, said, “APP Fraud is a huge industry-wide issue, with criminals targeting U.K. consumers and tricking people into sending them hundreds of millions of pounds a year. The way to fight back against this crime is to stop it happening in the first place, which is why we’ve invested heavily over 2023 in cutting-edge technology, AI and machine learning tooling to protect our customers. Our customer base is disproportionately affected by purchase scams, 70% of which originate on social media — these companies need to take decisive action like we are.”

And the industry group UK Finance issued a statement noting that the PSR data doesn’t show where fraud begins.

“Our data shows that 94 percent of authorized fraud starts online or over the phone, through social media, fake messages and more,” the group said. “But the technology and telecommunications sectors bear no responsibility for reimbursing victims, which means there is little commercial incentive for them to truly tackle the enormous threat that continues to proliferate on their platforms and networks.”

As PYMNTS reported in May, the U.K. has been plagued by a payments fraud epidemic in recent years, with APP fraud rising 40% between 2020 and 2021. 

Kate Frankish, chief business development officer at Pay.UK, told PYMNTS earlier this year that APP can be tough to identify, particularly for financial institutions. 

“From a bank’s perspective, it looks like a real payment, because the customer authorized it using all of their credentials. But it’s either going to an account that doesn’t belong to them or it’s going to a real person who has been scammed out of the money,” she said.