UK Banking Industry Highlights Rising £500m Online Fraud in 2023
In a concerning development, the banking industry in the UK has issued a warning about the surge in online fraud, resulting in criminals stealing an astounding £500 million in the first half of 2023. The latest fraud report by UK Finance, the finance trade body, emphasizes that many of these scams originate from social media and other online platforms. In response, the industry is urging other sectors to step up their efforts in combating criminal activities that are increasingly taking place on their platforms.
While the overall figures for fraud losses and cases have declined in the first half of this year, there has been a significant exception in the case of authorised push payment (APP) fraud, also known as bank-transfer fraud. The number of APP fraud cases rose by 22% to 116,324 compared to the same period in 2022. However, losses remained stable, falling by just 1% to £239.3 million.
Taking a closer look at the payment methods involved, there was a substantial 244% increase in APP fraud losses through intra-bank transfers, which refers to the movement of money between two accounts within the same financial institution. Additionally, losses via CHAPS, intended for high-value transfers such as house deposits, saw a 49% increase.
UK Finance has pointed out that three-quarters of APP fraud cases originate online, particularly highlighting investment scams advertised on search engines and social media, romance scams through online dating platforms, and purchase scams promoted on social media and auction websites, which account for two-thirds of all APP fraud cases.
The consumer watchdog organization, Which?, has taken a leading role in the campaign to hold social media companies and tech giants like Google and Meta accountable for preventing fraud on their platforms. As part of the Online Safety Bill, online platforms will be mandated to proactively prevent and swiftly remove harmful content. The responsibility for ensuring compliance will lie with communications regulator Ofcom, which will have the power to take enforcement action, including imposing fines.
Despite the rise in fraud cases, banks have managed to reimburse £152.8 million of APP losses in the first half of 2023, equivalent to 64% of the total amount. Furthermore, late 2024 will see the introduction of a mandatory reimbursement scheme for all payment firms utilizing the Faster Payments network. This scheme aims to provide victims of APP fraud with a refund in all but exceptional circumstances. However, consumer advocacy organization Which? has expressed some early concerns regarding certain proposed rules.
When it comes to unauthorized fraud losses involving payment cards, remote banking, and cheques, the total amount has decreased to £340.7 million. The number of recorded cases has also dropped by 10%, with 1.26 million cases reported this year. Banks have successfully prevented an additional £651 million from being stolen through unauthorized fraud.
While remote purchase or card-not-present fraud comprises the majority of payment card losses, this type of fraud has reached its lowest reported level in eight years, amounting to £173.8 million. This decline can be attributed to enhanced security measures like strong customer authentication.
However, UK Finance has observed that card identity theft has bucked the downward trend, with losses increasing by 57% to reach £33.1 million. This particular form of unauthorized fraud occurs when criminals utilize personal information and card details either to take control of an existing account or to apply for new credit cards.
Fortunately, victims of unauthorized fraud are fully protected by law, with UK Finance assuring that refunds are provided in 98% of cases. Should a bank or credit card provider refuse to reimburse unauthorized fraud losses, individuals are advised to file a formal complaint and, if necessary, escalate the matter to the Financial Ombudsman Service.
Overall, it is imperative for the banking industry and other relevant sectors to unite in the fight against online fraud. By strengthening preventive measures and heightening security protocols, financial institutions can better protect their customers from falling victim to these deceptive schemes. Furthermore, collaboration with online platforms and increased responsibility on their part can significantly contribute to curbing the rising tide of online fraud.
