Consumers face risks from APP Fraud

New research by FICO suggests that Authorised Push Payment (APP) fraud — when someone is tricked into sending money from their bank account to a fraudster — is not being taken seriously by UK consumers. The new data also suggests one of the most vulnerable sections of society — the 65+ age group — are the least worried by this form of financial fraud.

The research showed that only 16.3% of consumers ranked APP fraud as the financial crime that is their biggest concern, while slmost a fifth (19.6%) of women consider APP fraud the biggest fraud threat to them; only 12.8% of men feel the same. People aged 25-34 are most likely to consider APP fraud the number one fraud threat — 27.9% ranked it first, with only 8.4% of those aged 65 + consider APP fraud to be their biggest fraud worry.

The latest UK Finance Report shows a 22% rise in cases of APP fraud, yet new FICO research reveals that 31% of consumers surveyed rank it as the type of fraud they feel the least threatened by. Despite this, nearly 40% of respondents rank people being tricked into sending money to a fraudster — a description of APP fraud — as the type of fraud that they believe has the highest losses.

It seems there is a disconnect between consumers’ understanding of potential financial losses through APP fraud, and their perception of the threat to themselves.  The implications for older people are concerning, while people of any age can be victims, certain frauds such as pension investment scams target this age group.

James Roche, a Principal Fraud Consultant at FICO, believes the lack of consumer awareness of the risks of APP fraud needs to be addressed through effective customer communication. Financial service providers should also continue to focus on the innovation and real-time prevention measures. He said “Despite the work carried out by payment service providers to address vulnerabilities in their fraud prevention systems, our research strongly indicates that more needs to be done to communicate the real and present the danger of APP fraud to customers.”

“Consumers understand that APP fraud is costly, but it appears they think it is a crime that won’t happen to them. Recent moves by the regulator such as increasing the pressure on banks to re-imburse victims, may also be reducing caution. When people are reasonably sure that they will be paid back any losses to fraud, they might be less likely to ask if they really should be making the payment.”

“Payment service providers must up their game and get the message out to their customers that, despite the introduction of steps like Confirmation of Payee, fraudsters adapt and grow and APP fraud should still be a huge concern. Financial institutions also need to make better use of AI and machine learning tools to prevent incidences in the first place.”