Authorised Push Payment (APP) fraud is growing rapidly and requires the Open Banking and Open Finance industry to increase consumer education and intervention opportunities.
Panellists presenting at the London Open Banking Expo said that the proliferation of APP scams was growing at concerning levels compared to the growth rate of traditional card fraud.
Unlike card fraud, where cards can be cloned or payments initiated through card details, APP fraud occurs when a customer is tricked into authorising a payment to an account controlled by a criminal.
Dianne Doodnath, Principal, Remote Payment Channels at UK Finance, said criminals are increasingly moving away from trying to target banks directly, presenting a new challenge for Open Finance stakeholders to address.
“Criminals are looking at the access points and these are constantly growing,” she said. “There are controls coming, but last year APP fraud eclipsed card fraud for the very first time. This year, I think it is closer to being on par, but it is likely to continue to grow in the short-term.”
Doodnath’s warning comes just days after her organisation announced that there were 95,219 incidents of APP scams in the first half of 2022, with gross losses totalling £249.1 million.
In a media statement ahead of the event, UK Finance said that “fraud losses continue to be driven by the abuse of online platforms used by criminals to scam their victims”. Examples cited include search engines, social media, online dating platforms and auction websites.
Mark Courtney, Chief Product Officer at Cifas, said that the industry needs to recognise, not just the transactional nature of these scams, but also the human emotion tactics that criminals employ.
He said: “We can’t underplay that element of social engineering. In a lot of these situations, that person is absolutely convinced that they need to make that payment.”
Anna Roughley, Head of Insight at Lending Standards Board (LSB), added that the sophistication of this social engineering is such that the industry needs to think about enhancing its existing education programmes.
“Scammers and criminals are creating a burning platform for the customer at that point in time to make them unable to think rationally. An effective warning should get someone to pause and stop when going through a transaction.
“That customer is often convinced it is the right thing to do. All they want to do is make that payment. Sometimes any friction can even be a source of high frustration for the person making the payment. We need to look at how we can intervene in that process. The customer needs to be educated and have an opportunity for intervention much earlier in the process.”