UK banks see APP fraud losses rise as refund rules come under review

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UK banks APP fraud losses

Highlights

Authorised push payment (APP) fraud losses in the UK rose to 576.4 million pounds in 2023, the largest annual increase since the COVID-era surge.
Banks and payments firms reimbursed 354.3 million pounds to APP fraud victims, while investment scam losses hit a record 221.5 million pounds last year.
Frontier Economics is independently reviewing October 2024 APP fraud refund rules, with cost-sharing debates among banks, tech, and telecoms sectors intensifying ahead of findings in early July.

Fraud losses climb amid reimbursement regime review

As reported by UK Finance, losses from authorised push payment, or APP, fraud reached 576.4 million pounds last year, marking the sharpest increase in these scam losses since the COVID-era surge in technology-enabled fraud. The industry body's annual fraud report covers scams such as investment and purchase fraud, in which criminals persuade victims to transfer money directly.

The figures coincide with a review of rules introduced in October 2024 that require banks and payments firms to reimburse victims of APP fraud up to 85,000 pounds. The UK remains the only country to mandate reimbursement for APP fraud, although the dataset also includes losses that fall outside the scope of that regime.

UK Finance said banks returned 354.3 million pounds to victims. It also said investment scam losses, often linked to social media posts promising high returns, reached 221.5 million pounds last year, their highest level on record, while purchase and romance scams also rose to record levels.

Pressure grows on tech platforms and telecoms providers

Ruth Ray, UK Finance's director of economic crime, told Reuters that fraudsters are becoming more sophisticated in their use of social engineering, with AI helping widen the pool of potential victims. She said most APP fraud still begins on online technology platforms or through telecoms channels, strengthening the case for tougher enforceable responsibilities on those sectors.

Janine Hirt, chief executive of fintech lobby group Innovate Finance, said technology companies should help bear the cost of reimbursement and introduce stricter checks such as seller verification. A spokesperson for the Payment Systems Regulator, which introduced the refund rules, said tech firms need to do more to protect users, while banks and telecoms providers must also play their part.

Frontier Economics is conducting an independent review of the rules and is due to publish its findings in early July. The debate is likely to shape how the costs of fraud prevention and victim compensation are shared across the payments, technology and telecoms sectors.

Our earlier article on the Prax Group collapse outlined High Court filings alleging senior management used fabricated invoices to obtain additional bank funding, intensifying scrutiny of underwriting standards. It also highlighted the wider fallout for lenders and UK energy assets, including questions over credit controls after a run of fraud-linked failures.

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