Payments industry braced for threat of APP fraud

Ellie Duncan
10 Apr 2024

Authorised push payment (APP) fraud will have the largest impact on the payments industry in 2024, according to a survey by The Payments Association, which also found the majority of respondents believe AI is key to combatting fraud.

The findings are based on an exit poll of attendees, who were asked three questions relating to fraud at The Payments Association’s Pay360 event in London.

Of those surveyed, 39% identified APP fraud as the biggest type of fraud likely to impact payments this year, followed by AI-enabled fraud at 23% and identity fraud at 18%.

The Association reported that AI is increasingly being used as a “force-maximiser” by fraudsters, who adopt Large Language Models to communicate with their targets in a more “realistic” way.

However, more than half of respondents, or 57%, believe that AI will be the “next gamechanger” in the fraud prevention space.

Riccardo Tordera, The Payments Association’s head of policy and government relations said it is watching the development of AI in this space closely and working with the industry to separate “genuine solutions from the hype”.

“We have known for years that machine learning is the only thing with the sophistication and the capacity to tackle increasing volumes of fraud, but it’s not a simple case of installing an AI solution and watching it clean up fraud on your system,” Tordera added.

“It needs careful monitoring and optimisation to be truly effective, and this can be enabled by working together to share best practices.”

Tony Craddock, director general of The Payments Association

Tony Craddock, director general of The Payments Association, said: “The survey results show that our focus on APP fraud as a major vector of losses for both business and the general public was correct.

“Around £240 million was lost to APP fraud in the first six months of 2023, and this figure is likely to increase, at least in the short term, as payments companies struggle to adapt to new forms of fraud.”

He added: “We expect these adaptations to include enforcing pauses on payments from time to time, to validate a transaction when the payment is out of the ordinary, so consumers will no longer be able to expect faster payments to be fast.”

Last month, it was announced that UK banks will be allowed to delay payments by up to four business days should they suspect fraudulent activity, as part of a government amendment to the Payment Services Regulations 2017.

The new legislation is being introduced “as a priority” in an effort to tackle APP fraud.

Pay360 attendees were also asked how their company stays updated on emerging fraud trends and threats, to which 43% replied, through collaboration with other organisations, while 21% cited industry reports.