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Protecting customers from push payment scams

Fraud is a continuing problem globally. In fact, research from Experian highlights the annual cost of fraud as £190 billion, equal to nearly £7,200 per household. Although technology to protect customers continues to advance, fraudster will often find new, innovative ways of tricking people out of their personal details and money.

A scam that has become more prevalent over recent years is ‘Authorised Push Payment fraud’ (APP). Also known as ‘bank transfer fraud’ or push payments’, it misdirects funds being transferred between bank accounts with the account receiving the funds either being fraudulent or not the intended recipients. In this scenario, the customer can often lose large sums of money.

Although most recognise that APP fraud is a major issue, many businesses are still not entirely sure about how to respond. APP transactions to fraudsters’ accounts are initiated and authorised by the customer, which has led some organisations to accept no, or only very limited, liability, ultimately leaving customers to foot the remainder of the bill.

Acting on APP fraud

While the Financial Ombudsman, the Payments Systems Regulator, the New Payments Service Organisation and others continue to resolve the details of how APP fraud should be handled, the list of victims continues to grow daily. The question is, what can your organisation do to protect customers from fraud, starting from now?

One measure is to deploy bank account verification technology. This works by cross referencing payee account details with the name of the account holder. In this way, any discrepancies between the account details and the account holder’s name can be flagged to the person making the payment before they hit send.

From the customers’ perspective, this provides an extra level of protection. If the name of the account holder doesn’t seem to match the other details – including the account number – the bank can send a red flag. This gives the customer the opportunity to check the account details directly with their payee, potentially preventing money being sent inadvertently to an account controlled by a fraudster.

Staying ahead of the game

The real beauty of bank account verification technology, is that it is likely to support future regulatory initiatives around APP – helping you to stay ahead of the game. Not only does this approach support best practices to better report suspected APP case, but also better collaboration and case handling between sending and receiving banks.

It also helps you to demonstrate to your customers and the regulators that you are taking all reasonable measures to protect customers against APP risks – which could well be a requirement of the new rules when they come into force. Moreover, demonstrating to customers that you’re doing your upmost to protect will build trust and a positive brand affiliation.

Some businesses are concerned that an additional bank account verification check may cause added friction to the customer journey, however Experian research shows that some fraud prevention measures are valued by customers as they feel safer when logging into or managing accounts.

How do you stay ahead of fraud?

Recognising key trends and where the threats originate from can help you to understand your exposure to fraud, and how to plan and prioritise your detection and prevention investments more effectively. Below are five things for you to consider:

  1. Identify people – if you can understand exactly who an individual is, you can simplify the customer journey and securely on board more genuine customers while weeding out the fraudsters. Digital identities could improve your identity verification process.
  2. The answer lies in data – if businesses become more data-centric and data-driven then they could use the insight from the data to make more accurate predictions of risk. This can be done by verifying device, email addresses, behavioural biometrics and more.
  3. Multi-layered fraud strategy – create a single customer view by connecting all your fraud controls in one place. This can link your customer and operational data across multiple channels.
  4. Agile, responsive strategy – if all your fraud controls are linked on one system, this can allow you to be more agile and quick in the digital environment. You can add new innovative solutions to a platform which has already been set up.
  5. Understand the reality of your problem – if you have a clearer view of what your vulnerabilities are, you can better plan your fraud investments to improve these areas.
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