When the Payment Systems Regulator (PSR) introduced new rules around Authorised Push Payment (APP) fraud last October, it was fair to say it divided industry opinion.
While there was an overwhelming feeling that the 50/50 split between paying and receiving companies will undoubtedly help victims of APP fraud be securely reimbursed, payment service providers and financial institutions still had reservations over the new rules.
This was discussed further at a recent conference panel at Pay360 in London last week, where industry leaders shared some statistics and insight into how APP fraud has been affected since the new rules were introduced.
One of the key concerns the payments industry had was how the initial APP fraud £415,000 cap on reimbursement would actually incentivise fraudsters to exploit this price cap, which many companies successfully lobbied to have reduced to £85,000.
However, Mark Thynne, Senior Manager of the PSR, shared that reimbursement for APP fraud declined by 20% since October, with overall fraud cases down by 40% compared to 2023 levels.
He admitted there were concerns from across the UK financial landscape that APP fraud would rise and cautioned that the regulator is only working with four months of data since the implementation of the rules.
Thynne revealed that the reimbursement contribution amount is “still a bit lower than I would like on the compliance data”, but attributed this “very much to a systems issue” and is considerate of firms and people who may not be aware or understand the new ruling yet.
A shift to encrypted fraud?
Another concern the UK payments sector highlighted regarding the new APP regulation was the lack of responsibility placed upon social media platforms, where they believe a lionshare of fraud is originating from. This was expounded upon further by a recent financial crime report from Revolut this week.
The report stated that 54% of all fraud cases reported to Revolut came from Meta-owned social media platforms like Facebook, Instagram and WhatsApp.
But during the panel discussion, Rory Tanner, Head of UK Government Affairs and Public Policy at Revolut, focused more on encrypted messaging services like WhatsApp and Telegram as a key source of fraud activity.
Tanner shared that there has been a shift in fraud behaviour over recent years, as fraudsters have gradually moved away from social media platforms to encrypted sites, with 46% of fraud losses coming from the likes of WhatsApp and Telegram messaging victims over job and purchase scams in Q4’ 2024.
“We’ve seen action taken by social media platforms, but now we want this mandatory, because fraudsters are smart and will take advantage of the weakness in the system; encrypted platforms,” said Tanner.
Finding & stopping the source
Whilst the new rules around APP fraud will give victims peace of mind knowing they will be reimbursed, greater questions are being asked about how payment and fraud detection firms can stamp out these attacks before they begin.
The Financial Conduct Authority’s Head of Department, Market Interventions and Payments, Chris McGrath, shared that he has been in dialogue with firms on some of their current best practices to mitigate fraud and highlighted one key aspect that has been encouraging to see.
McGrath said that there is “a lot of good work” from companies when it comes to the control aspect of fraud detection and mitigation, placing greater analysis on where the problem emanates.
He also shared that firms are leveraging industry practices more and becoming more proactive on agent oversight to ensure the right controls are in place to detect fraud patterns more accurately and efficiently.
But as Rob Woods, Director International Market Planning, Financial Services SME at LexisNexis Risk Solutions, declared, fraud is still a prevalent issue that shows no sign of going away.
He acknowledged, however, that organised fraud crime is an ongoing issue, an issue that will not go away due to the cyclical cat-and-mouse nature that comes with fighting fraud.
There are still fraudsters impersonating family members to conduct first party fraud and purchase scams and victims are being targeted every day. But Woods did highlight that more people are now being reimbursed thanks to the APP ruling.
