The Payment Systems Regulator (PSR) released its 2022 report on how banks handle authorized push payment (APP) fraud, revealing a significant disparity in reimbursement rates among the institutions. The report spotlighted TSB as the leader in refunding victims, with a reimbursement rate of 91% of the total value and 94% by volume. Nationwide and Barclays (LON:BARC) followed, fully reimbursing 91% and 79% of reported cases, respectively. In stark contrast, Monzo and Danske Bank fully reimbursed only 6% and 7% of victims, respectively.
The PSR report also highlighted banks with the highest value of APP fraud per million pounds of transactions. Metro Bank led this list, with £696 of APP fraud for every £1 million received in 2022, followed by TSB with £605. Starling Bank was also on the list with £307 per million.
Monzo and Starling were noted for having the highest number of APP fraud payments per million transactions. Monzo lost more than double the amount lost by Starling (£112 per million transactions). These banks also underperformed in reimbursing victims, with Monzo and Starling reimbursing just 22% and 37%, respectively.
Despite these figures, the banking sector returned £152 million (GBP1 = USD1.2200) to APP fraud victims in the first half of 2022 alone. This highlights the financial services sector's significant investments in countering fraud, as UK Finance emphasized that it is the only sector that reimburses victims.
The PSR is working towards more consistent reimbursement arrangements across all payment firms. Many banks currently follow a voluntary reimbursement code which has seen varied interpretations across providers. To address this, mandatory reimbursement requirements are due in 2024, which will hold both sending and receiving firms equally liable for reimbursing APP fraud victims.
The regulator's report also focused on Faster Payments, which were used for 98% of APP fraud payments in 2022, despite being less than 0.1% of overall Faster Payments volumes. The PSR and the Financial Conduct Authority (FCA) are planning improvements for payment firms and will continue data collection over the next year for a 2023 report.
The report did not spare criticism for technology sectors, such as social media and telecommunications platforms. UK Finance revealed that 94% of such frauds start online or over the phone, facilitated by these platforms. These sectors were criticized for their lack of commercial incentive to prevent these crimes, prompting a call for more action to be taken.
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