The payments industry has warned the government that proposals to combat Authorized Push Payments (APP) fraud could have “unintended consequences”, including widespread fraud.
APP fraud occurs when scammers pretending to be a trusted organization trick victims into transferring money to a controlled bank account. Common examples include cryptocurrency scams and romance scams.
Banks in many countries refuse to refund losses caused by this type of fraud once the victim initiates payment.
For more on APP fraud, see Santander: Drastic action is needed to tackle APP Fraud.
Payments Association Executive Director Tony Craddock argued in an open letter released yesterday that the government’s attempts to tighten consumer protections could backfire.
The proposal to compensate nearly all APP scam victims could actually create more scams by encouraging bad actors to pretend to be vulnerable.
“It could also facilitate ‘first-party fraud’ where two parties intentionally set up ‘friendly fraud’ to double their money,” he said.
He also said that the plan to split the cost of this compensation between the sending bank/issuer and the receiving bank/issuer would discourage account issuers from opening and maintaining “margin accounts” because of the potential costs. He argued that it would result in being more cautious. This could make it difficult for low-income people, the elderly and other vulnerable groups to open bank accounts, Craddock said.
Finally, he argued that even though 80% of APP fraud comes from social media, these platforms have “little involvement” in fraud prevention.
“Most APP scams cannot be stopped at the root without involving the social media giants,” Craddock argued. “The proposed online safety bill is just one step towards ensuring upstream engagement and is essential to preventing fraud at the source. But it is not enough.”
APP’s losses hit £485m ($618m) last year, down 17% year-on-year, with nearly 80% of incidents initiated online and 18% over the phone, according to the latest banking data. I was.
The news comes as new research from Juniper Research predicts that merchants will lose more than $362 billion globally to online payment fraud between 2023 and 2028, with $91 billion lost in 2028 alone. It was announced while
