The Labour Party is apparently weighing in on a now long-running and hotly contested debate in the UK payments and finance space, with the general election looming.
According to the Financial Times, the Party has formulated a policy regarding reimbursement for authorised payment push fraud (APP) fraud victims. The policy might be well received by the payments sector.
The outlet claims to have seen a policy document in which Labour has taken aim at ‘big tech companies’, stating that these firms have a responsibility to reimburse fraud victims, as much as payments processing companies do.
Fraud reimbursement has become a major talking point in payments circles over the past year, largely due to the Payments Systems Regulator’s (PSR) forthcoming policies in this area. PSR will introduce new rules on 7 October, placing the responsibility for reimbursement solely on payments firms, up to a maximum of £415,000.
These rules have not been well received by the payments sector. Stakeholders have been particularly vocal about the role social media plays in fraud, arguing that companies in this space should share responsibility. Various banks and financial companies – TSB, Barclays and Revolut to name a few – have repeatedly pointed to social media’s role in fraud.
In comments sent to Payment Expert, Silvija Krupena, Director of the Financial Intelligence Unit at RedCompass Labs, says: “It’s important that social media platforms don’t get let off the hook when it comes to reimbursing victims of online fraud. 77% of all APP fraud cases originate online through platforms like Meta, which rake in billions of dollars in profits each year.
“Criminals use social media platforms to source material for AI and then contact potential victims with a simple message on the same platforms to scam people out of thousands of their hard-earned cash.
“It is vital that these companies not only face financial consequences when user information is compromised but also when they fail to educate their users about the potential dangers of online fraud.”
The Financial Times adds that Labour’s policy document acknowledges the concerns raised by banks. Whilst not specifically citing social media, the policy document does state that the platforms on which fraud takes place, which according to banks are largely social media platforms, should be included in fraud reimbursement policies.
The UK general election will take place tomorrow (4 July) and opinion polls suggest the Labour Party is set for a landslide victory, perhaps even surpassing the record set by Tony Blair’s Labour campaign in 1997.
Given the extensive backlash the PSR’s incoming rules have received from payments stakeholders, Labour’s freshly unveiled policy in this area may endear it more to the finance sector.
“I am overwhelmingly in favour of tech firms being held more responsible for fraudulent activity as they are often the source,” said Jessica Cath, Head of Financial Crime at Thistle Initiatives, a financial services consultancy firm.
“If tech firms were liable for reimbursing victims (at least in part) this would encourage collaboration and data sharing across sectors to help bring fraud rates down.
“Multi-industry responsibility and collaboration would make APP fraud prevention much more effective – for example, if social media and telecoms companies were encouraged to share suspicious behaviour related to a phone number or social media profile, they could be linked to bank accounts. This would make the identification and elimination of fraud networks far easier.”
However, the election result is still not determined, and the 2016 Brexit referendum and US elections prove that opinion polls are not always an accurate reflection of public opinion.
The PSR rules also come into force in just three months, and it is unlikely that a Labour government will prioritise this amid a myriad of other policy commitments.
Banks and payments providers should still ensure they are prepared for the changes, which split reimbursement requirements 50/50 between sending and receiving firms.
“Ahead of the new rules in October, banks also need to be prepared to take preventative action,” Krupena continues.
“They should focus their investment on exploring new technologies such as AI and data-driven, persona-based approaches, which can flag suspicious transactions and stop them before it’s too late. This will potentially save hundreds of millions of pounds from being stolen by fraudsters.”
Labour’s new stance on APP fraud reimbursement adds to a broadening policy portfolio in the finance sector. Keir Starmer’s opposition has also outlined policies to support continuation of retail banking services, facilitate further development of Artificial Intelligence, and encourage Open Banking’s development and adoption.
