Faith in social media has taken a hit due to fraudulent activity committed via the platforms, according to the Payment Systems Regulator (PSR).
The PSR is one of the UK’s major finance industry regulators, and the one with the most responsibility for fraud prevention. Authorised push payment (APP) fraud, which is often committed via social media, has been one of the regulator’s key focus points this year.
In a recent report, the PSR outlined the findings of a survey of 1,500 UK consumers. A key finding is that 41% of victims reported a ‘loss of trust’ in social media companies, four times as many as those who had lost trust in traditional banks.
The regulator states that this ‘reinforces the need for online marketplaces and social media platforms to take greater responsibility in preventing fraud’. For various UK banks, this could also serve as a validation of a long-running argument the sector has held around fraud prevention and reimbursement responsibilities.
“This research emphasises the devastating impacts of fraud on consumers’ mental wellbeing and trust,” said Kate Fitzgerald, the PSR’s Head of Policy.
“APP fraud isn’t just a financial setback, it affects people’s confidence in payments and can leave them fearful of using digital platforms and retailers in the future.”
Various banks and financial institutions have pointed to fraudsters using social media as a platform to conduct their scams, usually by advertising false purchases or investments via posts or by reaching out directly to victims, such as with romance scams.
Research conducted by TSB Bank back in October found that 34% of Facebook Marketplace adverts were scam posts. Fellow retail bank Barclays came to similar conclusions, finding that 61% of investment scams take place on social media platforms.
This argument was recently reiterated by TSB and NatWest, the latter finding that 30% of fraud cases are conducted on social media whilst the former attributes 67% of all purchase fraud scams by volume to Facebook and 15% to Instagram.
“At this time of year, we’re all shopping online more than ever – but it’s important to be wary of scams on social media platforms, as crooks are listing items that simply don’t exist,” said Nicola Bannister, Director of Customer Support at TSB.
It is important to contextualise these arguments, however. Much of this research has been conducted in the context of the PSR’s aforementioned APP fraud reimbursement rules, which faced some backlash from the UK banking and payments sectors.
Firms argue that Big Tech and social media operators should play a bigger role in fraud prevention and also in reimbursement. To these banks’ credit, the government appears to agree, with Labour outlining that it would like to see Big Tech firms have more responsibility for fighting fraud, alongside the financial services sector.
Regarding the reimbursement rules, the PSR’s latest update has seen the regulator stand by its requirements. The rules not only reimburse victims but also provide an incentive for payments firms to do more to prevent fraud, it stated.
The regulator also has consumer concerns to factor in, with these being arguably the most important voices in the discussion around fraud. The regulator’s survey found that 67% of APP fraud victims state that getting reimbursed for losses is their top priority, unsurprisingly.
Victims who have been reimbursed are also less likely to have long-lasting emotional impacts and have more trust in banks, the PSR adds. The regulator asserts that reimbursed victims are more likely to be vigilant about fraud and not complacent, as some have argued.
