UK Finance, the banking and financial services trade association, recently published its latest data on Authorised Push Payment (APP) fraud, revealing that £583.2 million was lost to these scams last year, 39% up on the same period in 2020.
APP fraud – where victims are tricked into sending funds from their bank account to a fake or fraudulent account – now exceeds losses caused by card fraud and, at a recent industry webinar, it was likened to the ‘digital COVID’ of fraud.
There were 195,996 incidents of APP scams in 2021, including:
As this type of fraud looks set to continue to rise (the Financial Ombudsman reported a 30% increase in complaints about APP scams in the second quarter of 2021), we ask whether open banking can play a role in helping to fight fraud?
How can Confirmation of Payee help?
While not a silver bullet in stopping APP fraud, the Confirmation of Payee (CoP) account name checking service was launched by Pay.UK in 2020 to help prevent fraud and accidentally misdirected payments.
When consumers and businesses make a payment, CoP lets them check if the money’s going to the right account. Before they transfer any funds, they can verify that the name on the recipient account is the same person or business they intend to send the money to, so funds end up in the right place. If the name on the account doesn’t match, CoP highlights the risks.
Lloyds Banking Group said that the system helped reduce bank transfer scams by 31% within the first few months of its introduction in 2020. The CoP service has now processed more than one billion messages.
Reducing misdirected payments
The Payment Systems Regulator (PSR) also noted that, since the big six banks first introduced CoP in 2020, the service has had a positive impact on misdirected payments as well as scams.
We work closely with Pay.UK to help deliver CoP, which is available in the UK through the OBIE Directory, and in Jersey, Guernsey and the Isle of our Man through our Crown Dependencies Directory.
Kate Frankish, Chief Business Development Officer and Anti-fraud lead at Pay.UK, said: “We need to fight together, with better collaboration and knowledge sharing between banks, the government, regulators, telecoms and social media companies, and law enforcement. We need to increase public awareness of the risks of fraud. And we need to share data and technology that can spot the crime and enable banks and payment providers to intervene before it happens.”
Ted Sidgwick, Head of Propositions at the OBIE, added: “Open banking has an integral role in Pay.UK’s CoP service, and we are pleased to support the open banking ecosystem in the ongoing fight against fraud by sharing our experience of the service with account providers who are considering joining the ecosystem.
“This is particularly important as the PSR looks to extend the rollout of CoP, with the aim of encouraging further participation in the service by making it possible for all banks, building societies and PSPs to offer CoP. It will also help increase consumer confidence when setting up new bank payments.”