There's only so much payments friction banking customers are prepared to take

There's wisdom in the idea that faster payments means faster fraud. 

But the evidence wouldn't suggest that its opposite is even nearly true. Do slower payments slow down fraud? Maybe, but not by much.

Consumer research we ran this autumn found that one in two UK adults have by now experienced some sort of payment scam or attempted scam. Despite this proliferation, however, it’s not slowing down the way they make their payments. Only a third of UK adults read their banks’ fraud warnings before making a payment, nor do they find the warnings a helpful reminder to slow down and think about the payments they are making. 

Consequently, when the data then tells you that one in three people who have been scammed will go on to be scammed at least once again, it’s not altogether surprising. 

The friction that aims to slow down payment fraud isn’t working. A major chink in its armour is that it was never designed with eradicating fraud front of mind. 

The warning messages and videos, and multiple layers of consent that we have become so used to seeing every time we make an instant bank transfer were first instigated by the banks as a way to place more accountability for fraud losses onto customers. Reducing the frequency of successful scams was on the banks’ minds but not at the forefront. Think of it as a nice-to-have.

New regulatory rules have changed the landscape somewhat. Since early October, rules laid down by the Payment Systems Regulator mean that every UK bank must reimburse customers that fall victim to proven payment scams to the tune of £85,000 per case. 

As these hastily-imposed rules take effect, the burden of financial loss is starting to weigh more heavily than ever on the banks, and it’s natural to assume that banks will go further than ever to ensure that more customers are accountable for losses that could have been prevented - taking the ‘consumer gross negligence’ route. 

Right now, that idea of ‘going further’ means adding more layers of friction. More warning notices, more layers of controls, more onus on consumers to verify the identity of their payees.

It’s an over-reliance on tools that are doomed to fail. Study after study conducted by banks we work with show that friction isn’t having the effect the banks would like to see. 

Breaking the spell with a customer is really hard. Even if the bank is sure it is fraud, they are ‘catching and releasing’ only 50% of cases. Putting the onus on consumers to educate themselves and be wholly vigilant is an unsustainable idea. 

But this goes beyond just one conversation about whether or not it’s right or fair for customers to carry more burden. 

Banks risk losing customers and public trust if they add more friction and the fraud keeps coming. Even with the likelihood of reimbursement, becoming the victim of a scam is a horrible thing to experience. Respondents to our research reported feeling shame, embarrassment as well as fear for their financial security and the wellbeing of their families after experiencing scams. It’s a whole-body experience, whether you get the money back or not. 

Regulators globally are watching how successfully the PSR embeds their reimbursement rules here. The hope and expectation is that more regulators will become bolder in 2025, encouraging and mobilising more banks to turn their attention to innovation that diminishes the hold fraudsters have on the global payments system and stops scams before they happen. 

Slowing down payments will not slow down fraud. It doesn’t reduce the bill for banks and it doesn’t empower customers to make better payment choices. The impact of slowing payments goes further too. Slow payments are bad for the economy and bad for financial inclusion. So much of fintech innovation has been built on the tenet that faster means better. Let’s not give up on that idea, but instead move faster with tools such as identify verification and geolocation vetting to get ahead of the scammers.