Authorised push payment (APP) fraud continues to be a major headache for the UK banking industry and its customers, contributing to almost half a billion pounds in losses in the first half of 2023, according to UK Finance.
The banking body’s 2023 Half Year Fraud Update noted that although the headline figure for fraud losses fell 2% year-on-year (YoY), a worrying volume of incidents are bypassing banks’ fraud filters.
APP fraud is a classic example: it refers to any incident where a scammer posing as a trusted entity tricks the victim into transferring money to a bank account under their control.
It accounted for nearly half (£239m) of total fraud losses in H1 2023, up 27% on the same period in 2020. Case volumes surged 22% YoY.
Read more on APP fraud. Santander: Radical Action Needed to Tackle APP Fraud
The main driver for APP fraud was purchase scams, where people pay for goods that never materialize. Cases surged 43% YoY while losses increased 31% YoY to £41m. They now account for 66% of all APP fraud cases, but only 17% of losses given that they tend to be relatively low-value scams.
At the other end of the spectrum is high-value investment fraud, which now accounts for nearly a quarter of all APP losses (£57m).
“A common factor behind all these scams is the criminals’ use of online platforms, mobile phone networks and social media to target their victims and trick them into making payments. This includes fraudulent advertising on search engines, fake websites, and posts on social media,” the report noted.
“UK Finance has begun collecting and collating data on the origination of APP fraud which shows that 77% of all APP scams during 2023 originated on an online platform of some description. This demonstrates the scale of fraud initiated outside of banks controls.”
However, there are things banks can do to help mitigate APP fraud risk, such as Confirmation of Payee (CoP) checks which alert customers setting up new payments if the payee bank details and name don’t match or aren’t recorded.
Emma Lovell, CEO of non-profit industry body the Lending Standards Board, argued that all sectors including tech and social media providers should play their part in fighting fraud.
“The Contingent Reimbursement Model Code (CRM Code) exists to ensure signatory firms safeguard their customers with procedures to detect, prevent, and respond to APP scams. Prioritizing prevention and detection in the battle against APP fraud has never been more pressing,” she added.
“The industry should rally behind the need to retain the safeguards delivered by the CRM Code beyond reimbursement alone. Upholding an industry code will ensure that firms maintain their commitment to the consistent implementation of measures to prevent fraudulent activities at the forefront.”