Stronger Protection For Victims Of APP Fraud

It has been reported that banks and building societies will have stronger incentives to prevent scams happening in the first place, as well as having to reimburse victims who have been tricked into transferring money to a fraudster, under a regulator’s proposals. The Payment Systems Regulator (PSR) has published a consultation to usher in greater consumer protections from authorised push payment (APP) scam losses. Kate Fitzgerald, interim head of policy at the PSR, told the PA news agency that the plans would ensure a more consistent approach for customers, “levelling the playing field”.

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Dan.Holmes
Dan.Holmes , Fraud SME
InfoSec Expert
October 4, 2022 11:20 am

Today the PSR outlined their latest proposal to further protect consumers against the risk of APP Scams. Consultation on specifics is now taking place, and more details will be revealed on or after November 25thThe proposal represents great news for consumers but a more challenging commitment for the banks. The proposed changes include: Mandatory reimbursement of online and mobile scams in all but exceptional cases. Currently < 50% of consumers are refunded, so this represents a massive change. As a result, banks will be encouraged to up their game when it comes to detecting scams, otherwise their fraud loss lines will take a significant hit. Creating consistency across all banks in terms of reimbursement process. Today, many banks are enrolled in the CRM (we can link to CRM here?), but ambiguity in terms of process and treatment has meant that consumers often suffer different refund outcomes and overall experience, depending on which FI they bank with. 

However, without doubt the biggest shake up is the sharing of loss liability between the sending bank and the receiving bank. This is a seismic shift, as traditionally it was always the sending banking that owned the fraud liability. This change encourages FI’s to collaborate more effectively, and monitor the end-to-end cycle of the payment, rather than looking at the sender and beneficiary as separate entities.

The PSR is aiming to move quickly in order to bring forward this enhanced consumer protection. However, in the meantime they are encouraging banks to continue to develop their fraud controls and strategies to manage the ongoing risk of scams. A good scam strategy should contain multiple layers, including:

Transaction analytics in real-time to understand if a payment is consistent with the consumers normal spending patterns. Additional data feeds to support this transactional decision, including device and behavioural signals. Strong education and awareness campaigns for both consumers and bank staff.

Finally, the PSR are keen to drive publication of data on how well banks are protecting their consumers from the summer of 2023. This unprecedented action could have dire consequences for those who perform poorly; this includes lack of consumer confidence, customers moving their banking relationships to FIs who are perceived to be more secure, as well as the risk of overall reputational and top line share price damage. On the flip side however, FIs who perform well could welcome a new stream of customers seeking enhanced fraud protection onto their books.

Last edited 1 month ago by Dan.Holmes
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