App Fraud Identified as Leading Financial Crime Threat
Two-thirds (65%) of payments professionals view fraud as their most pressing financial crime threat, with authorized push payment (APP) scams leading the list, according to a new industry study.
The Payments Association surveyed "selected decision-makers" at several major UK payments companies for its financial crime survey. Among 13 types of fraud, APP fraud was identified by 27% of respondents as the most impactful on their organizations and customers.
APP fraud involves scammers posing as trusted entities to trick victims into transferring money to accounts they control. This includes purchase fraud, where victims buy items that never materialize, and romance/investment scams.
UK Finance reported that three-quarters (76%) of APP fraud cases last year originated online and 16% from telecoms, with purchase scams accounting for 67% of all 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 but most concerning types of fraud.
"Oftentimes, APP fraud attempts are as simple as a text claiming to be from a bank asking for funds to be transferred," he said.
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"The issue lies in the vast number of people a fraudster can target with such messages. Years of data leaks have provided bad actors with tens of thousands of phone numbers at low cost. Even with a 1% success rate, these scams can still cost hundreds of people thousands of pounds. It's the scale of APP fraud, not its sophistication, that is most alarming."
According to UK Finance, APP fraud cases increased by 12% year-on-year in 2023, though losses fell by 5% to ￡460m.
However, payment service providers (PSPs) are concerned about upcoming regulations that will make them liable for losses due to APP fraud on their platforms, with liability shared equally between the PSP sending and the PSP receiving the payment. The Payments Association is advocating for a lower upper liability limit.
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