The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

While regulations are essential in maintaining trust in our digital economies, they add a significant compliance burden for banks. Most recently (October ’24) the Payment Systems Regulator imposed new Mandatory Reimbursement rules for Authorised Push Payment (APP) fraud. Designed to foster greater collaboration between the financial sector and tech industry in the fight against fraud, they share the burden of reimbursements to the victims of APP fraud between both the sending and receiving banks.

Mandatory Reimbursement is a bold move by UK regulators, and it’s received plenty of media attention following several years of APP fraud cases regularly hitting the headlines illustrating the harm not only due to the financial impact, but also the mental anguish and loss of trust in online banking, suffered by victims. The new legally binding rules state that banks will have to reimburse customers up to a maximum claim of £85,000 within five working days.

While APP fraud is perpetrated across all channels, losses from phone-based scams where fraudsters impersonate trusted individuals to coerce victims into making fraudulent payments is disproportionately high. These types of coercive impersonation frauds are most often devastating events for their victims, leaving a lasting impact on them and eroding trust in online systems. In 2023 phone-based scams made up 17 per cent of APP fraud cases, however, they accounted for 43 per cent of the total value lost.

Following last October’s rollout of Mandatory Reimbursement, banks have turned to the telecoms industry and how it can support their efforts in the fight against fraud. At JT we’ve been working with banks and mobile network operators to establish how banks can best integrate real-time mobile intelligence data into their customer journeys to help them effectively prevent APP fraud events from happening, without creating excessive friction in the processing of payments. We recognise that while reimbursement ensures that consumers aren’t left financially ruined from being scammed, only prevention will instil trust in our banking customers. The award-winning Scam Signal solution is now successfully deployed in a number of the UK’s leading high-street banks with very promising results in the detection of APP fraud attempts.  

For the banking and financial services sector it’s essential they can demonstrate their efforts to reduce APP fraud to ensure both compliance with the new regulations and to remain competitive as consumers place greater importance upon cybersecurity and fraud protection when choosing service providers. Critically, for their bottom line they will need to minimise their exposure to the risk of reimbursements and financial penalties. While larger banks under the previous voluntary reimbursement code will be able to absorb these costs, neobanks and smaller FIs are considered at particular risk due to having less financial resilience in the face of being overwhelmed by reimbursement claims.

Fraud is now perpetrated on an industrial scale and as scam centres have been uncovered in regions like southeast Asia its harm both to those losing their life savings from being scammed, to those trafficked into scam centres by criminal gangs is more apparent than ever. As AI threatens to significantly amplify the threat from fraud, cross industry collaboration must be at the heart of our efforts to prevent fraud from happening so that trust remains in our banking systems.

Join our webinar on 13 March to learn how Mobile Intelligence is helping banks combat Authorised Push Payment (APP) fraud, especially with the new Mandatory Reimbursement regulations. The panel will also discuss how a mobile intelligence solution uses real-time telecom data to detect APP scams, highlighting its role in fraud prevention and the importance of cross-industry collaboration.