Fraud in the Covid Age - Authorised Push Payment Fraud

In my previous blog (click here), I spoke about how Card Fraud had reduced globally, but that there was significant fraud in other channels. According to UK Finance, in the UK Authorised Payment fraud totalled £480m in 2020, a value that is only 17% less that the value lost to Card Fraud (£574m). And in the US, while the values are going down compared to other markets – the primary channels that are targeted in payment fraud are common to those most prevalent in the UK and Australia.

So, what are the trends here in these three markets, and what can they tell the wider global industry. Firstly, change is an area of opportunity for fraudsters to commit fraud. The increase in phishing/smishing attacks, Social Engineering attempts and subsequent Authorised Push Payment fraud is a real concern for the industry.

Authorised Push Payment Fraud (APP for Short) has seen a marked rise over the last few years, driven by the increased use of digital, instant Payments. It is favoured by the fraudster as a means to access funds from the victim quickly, plus that agility of payment can then be used to layer payments (money laundering).

In UK Finance’s publication “Card Fraud the Facts 2021”, for the UK, cases were up 45% in 2019, and 34% last year (2020). Interestingly the value lost didn’t increase by the same amount, indicating that fraudsters are targeting smaller gains more often. For example, on average each case takes place over 2 transactions with an average loss of £2,932, down from an average loss of £3,724 in 2019. However, the number of cases rose from 122,437 cases in 2019, to 163,990 in 2020. The only difference is so call romance scams, where the losses per event consisted of 5 transactions on average.

And the same is true in the US. From the US Consumer Sentinel publication, of the top 10 fraud scams each year in 2019, the median loss for each fraud type was $564 (calculated by taking the median of the median value lost for each top ten fraud type). In 2020 this median value rose to $912. Imposter Scams (those where an individual claims to be a family member that needs emergency funds or is pretending to have a romantic interest) was the biggest source of fraud, with a total loss in 2020 of $1.1bn, compared to $667m (an increase of 78%).

And looking at Australia (data from scamwatch.gov.au) again it’s a similar spread, whereby investment scams are the highest loss type with AUD65.8m lost (compared to 61.8 in 2019); followed by Dating and Romance Scams at AUD38.9m (AUD28.6m in 2019) and False Billing at AUD18.4m (AUD10.1m in 2019). What is interesting is the channels fraudsters use; with a real focus on channels that can be automated, e.g., SMA, Phone and email. The report volumes for 2020 for those 3 channels was around two thirds of the total reports made.

And interestingly, age does not clearly determine who is most likely to succumb to Authorised Push Payment Fraud. In the US, 49% of fraud losses were to individuals ages 49 and under. And in Australia for the same period, 49% of losses were to individuals aged 44 and under (the age difference is purely down to the criteria each body uses to segment their data). But from the Australian statistics at least, the value lost for those aged 45 and over is around is around 58% higher than those aged under 45, indicating that that age group is more vulnerable in terms of losses.

So, with that, it’s clear that Authorised Push Payment Fraud must be an area of focus for the Financial Services industry. The level of fraud in this area is most definitely on the increase, and it’s clear that the pandemic has exacerbated this.