Authorised push payment (APP) fraud has been identified as the top threat to businesses and consumers by decisionmakers at UK-based payments companies, according to new research by The Payments Association.
Among the companies surveyed, including banking and account providers, technology providers, and Open Banking providers, 65% cited fraud as one of the biggest challenges defining financial crime in the next 12 months.
The Payments Association revealed that, of the 13 types of fraud outlined in its survey, 27% of respondents identified APP fraud as the form of fraud that most impacted their companies and customers.
Riccardo Tordera, director of policy and government relations at The Payments Association, said it is the scale, rather than the sophistication, that is the “most worrying” aspect of APP fraud.
“Often, APP fraud attempts can be as simple as a text claiming to be from a bank asking for funds to be transferred,” he said.
“The problem stems from how many people a fraudster can target with that message: years of data leaks mean that bad actors can get tens of thousands of phone numbers for very little, and if a fraud attempt is only 1% effective, it could still cost hundreds of people thousands of pounds.”
The latest UK Finance Annual Fraud Report showed that APP fraud losses were £459.7 million in 2023, down 5% on 2022, comprising £376.4 million of personal losses and £83.3 million of business losses.
However, the total number of APP cases climbed 12% to 232,429, driven mainly by purchase scams, where people pay for goods that never materialise and which now account for 67% of the total number of APP cases.
PSR’s reimbursement scheme
The Payments Association also reported on findings related to the Payment Systems Regulator’s (PSR’s) incoming APP fraud reimbursement requirement scheme and called for the PSR to lower the reimbursement amount.
Under the scheme, which comes into effect on 7 October this year, the maximum level of reimbursement per claim will be set at £415,000, with the cost of reimbursement split 50:50 between sending and receiving payment firms.
Research by The Payment Association found that 58% of respondents were aware of this change, although not all respondents are payment service providers.
Among those respondents affected by the new rules, 70% are implementing a combination of measures of their own to help, including re-evaluating customers based on risk and reviewing incoming transactions.
Tordera said: “Time will tell whether these measures will be enough. That said, the currently proposed repayment threshold is disproportionate. Having to repay £415,000 could sink a small, innovative fintech company, so we would recommend a top upper limit of £30,000.”
He added: “The average scam costs businesses £11,000, and members of the public £1,500, so £30,000 is still more than double the average scam for businesses and 20x the average scam for consumers.
“We are not contesting the principle of reimbursement, we just want this to align with the average scam.”
