Monzo Tops the Charts for Fraud and Lowest Refunds, Finds Regulator
Monzo customers experienced the highest rate of fraud among major banks in the UK, according to a report by the Payment Systems Regulator (PSR). In 2022, 141 out of every one million transactions made with Monzo were targeted by fraudsters, the highest rate among all major banks. The report also highlighted that for every £1 million sent via Monzo, £280 was lost to payment fraud. However, Monzo was found to be the least likely to provide a full refund to victims, with only 6% of victims receiving a complete reimbursement last year. In contrast, TSB fully refunded 94% of fraud victims, while Nationwide refunded 91%.
The figures specifically focus on authorized push payment (APP) fraud, where victims are tricked into transferring funds to accounts controlled by fraudsters. APP scams have become the most common type of fraud in the UK, accounting for 40% of all cases in 2022. To address this issue, new regulations will come into effect next year, requiring banks to automatically refund victims of push payment fraud. The PSR stated that both the sending and receiving banks will be equally liable for reimbursing victims in nearly all cases.
Monzo, with its reported customer base of 7.5 million and a growth rate of 28% from the previous year, has positioned itself as a user-friendly banking app. However, the bank has struggled to deal with fraud-related issues effectively, leading to criticism. The PSR emphasized the need for more consistent protection across all payment firms and highlighted the inconsistent outcomes for customers who report APP scams to their bank. The regulator has given payment firms 20 days to provide information on their websites regarding their fraud reimbursement policies.
Ashley Hart, the Director of Fraud and Disputes at Monzo, acknowledged that APP fraud is a significant industry-wide problem impacting UK consumers, with criminals siphoning off hundreds of millions of pounds annually. Hart emphasized the importance of preventing fraud from occurring in the first place and stated that Monzo has invested heavily in cutting-edge technology, AI, and machine learning tools to protect its customers. One particular challenge for Monzo is the disproportionately high number of purchase scams affecting its younger customer base, with 70% originating from social media. Monzo called on social media companies to take decisive action to combat fraud.
In conclusion, the Payment Systems Regulator’s report sheds light on the alarming rate of fraud experienced by Monzo customers, coupled with the bank’s low refund rate for victims. The upcoming regulations aim to provide automatic reimbursement for victims of push payment fraud, ensuring greater consistency across all payment firms. Monzo has recognized the need to enhance its fraud prevention measures and has invested in advanced technologies to protect its customers from scams. As the battle against fraud continues, it is crucial for banks and other stakeholders to work together to safeguard consumers and maintain their trust in the financial system.
