APP Fraud Singled Out as Biggest Financial Crime Threat

Two-thirds (65%) of payments professionals see fraud as their most urgent financial crime threat, with authorized push payment (APP) scams topping the list, according to a new industry study.

The Payments Association polled “selected decision-makers” at an unnamed number of major UK payments companies to compile its financial crime survey.

Out of 13 types of fraud, APP fraud was identified by 27% of respondents as the type that most impacted their organization and customers.

It refers to incidents where a scammer posing as a trusted entity tricks the victim into transferring money to a bank account under their control. This could include purchase fraud, where a victim buys an item that never materializes or romance/investment scams.

Read more on APP fraud: Purchase Scams Surge as Fraud Losses Hit £580m

UK Finance said three-quarters (76%) of cases last year stemmed from online sources and 16% from telecoms, with purchase scams accounting for 67% of the total number of APP cases in 2023.

Riccardo Tordera, director of policy and government relations for The Payments Association, described APP fraud as one of the least sophisticated types around.

“Often, APP fraud attempts can be as simple as a text claiming to be from a bank asking for funds to be transferred,” he added.

“The problem stems from how many people a fraudster can target with that message. Years of data leaks mean that bad actors can get tens of thousands of phone numbers for very little, and if a fraud attempt is only 1% effective, it could still cost hundreds of people thousands of pounds. In short, it isn’t the sophistication but the scale of APP fraud that is most worrying.”

According to UK Finance, APP fraud cases rose 12% year-on-year in 2023 but losses actually fell by 5% to £460m.

However, payment service providers (PSPs) are concerned about new rules which will soon force them to be liable for any losses due to APP fraud on their platforms, split 50-50 between the PSP that sends and the PSP that receives the payment. The Payments Association is trying to lobby for a smaller upper liability limit.

“The currently proposed repayment threshold is disproportionate,” argued Tordera. “Having to repay £415,000 could sink a small, innovative FinTech company, so we would recommend a top upper limit of £30,000.”

In the meantime, the Labour Party has said it will force the providers of digital platforms on which much APP fraud originates to contribute more to reimbursing consumers.