Scamdemic: Payor Payments goes #1 in Fraud: 300% increase since 2015

APP (Authorised Push Payments) and taking control of bank accounts are 54% of the £1.26 billion fraud in 2021.

Given the sheer volume of scams being generated, 70% of people with mobile phones have receive a text message claiming to be, for example, from Royal Mail requesting a small payment for parcel delivery. These scams, as they expand, could make 2021 a bumper year for people being conned.

Available and inexpensive technology is enabling millions of scams to be sent by any wannabe fraudster. Fraudsters are moving their bank accounts to banks where Confirmation of Payee (CoP) is not checked – which is all but 9 banks. These combined activities saw a rise of 234% in two years 20 over 200,000 people being defrauded. At this rate, with more fraudsters, copycat websites, using multitude points of contact – text, phone, and email – by 2023 could exceed 1,000,000 victims. 

Banks clearly believe the fraud is the responsibility of the Payor bank account owner as up to the arrival of Voluntary Reimbursement Code, (CRM Code) signed by 12 banks, 80% of the defrauded money was paid by their customers. The first half year of the Reimbursement Code the customers have had to pay 60% with some banks requiring their customers to pay 90%.

Banks are silo based when it comes to tackling fraud. Each has its own approach to protecting people and companies from financial crime. All have different approaches to, for example, fraud monitoring, AML (Anti Money Laundering) and KYC (Know your customer) solutions. Each utilizes its own data and gives limited view of the Payee customer and transactions to the Payor, even if the payor and payee are at the same bank. 

It is this lack of collaboration from the banks coupled with the use of old technologies that facilitate the scams by the fraudsters. Fraudsters always go to the weakest link in account set up and fraud protection.

While fraud has always existed, the technology allows fraud to be conducted against anyone at any time and the holders of people’s money need to be better protected. Currently there is good news on using real time technology and the abandonment of older payment types:

• Card Payment fraud, once the #1 fraud had barely increased in amount since 2015. The total amount dropped 10% from the year before. Here the credit card companies working with the banks deliver real time analysis and protection for their clients. Credit card companies are now promoting their strengths against the scammers by telling the public use a credit card and NOT your bank debit card for online payments and you will be refunded on the credit card if it is a fraud

• Older payment types such as Cheque fraud dropped 50% since 2015. A combination of the banking and society using electronic instead of physical payments. COVID has accelerated the decline of cheques and cash. Cash, with companies recommending card payments, now only represents 27% of retail purchases. 

The issue for the banks is how, they can collectively, tackle industrial scale on-line scamming which, though technology, is both pandemic and increasingly sophisticated. 

1. As only 9 banks currently use CoP let’s look at making it mandatory
2. As only 12 banks signed the CRM Code, let’s make it mandatory
3. The banking community must use the ownership and transactional bank account data they have fastidiously collected over many years to show the likelihood of a payor bank payment being a fraud 

         Banks make resources available for any regulatory compliance issues

We welcome the digital era, but security must be on a par universally.