The PSR make recommendations to better protect against bank transfer fraud and payment errors

Fraud is a continuing problem. We hear about it in multiple shapes and forms.
Bank transfer, or push payment scams, are the second biggest type of payment fraud reported by UK Finance. This is in both the numbers and total values involved – just behind Credit Card fraud.

Recently bank transfer fraud has caught the media’s attention. Also known as ‘push payments’ or ‘APP scams’ (Authorised Push Payment), it misdirects funds being transferred between bank accounts with the account receiving the funds either being fraudulent or not the intended recipient. In this scenario, the customer can lose their money, often large sums.


In relation to the emerging threat of push payment fraud, consumer group Which? raised a super-complaint last year to the Payment Systems Regulator (PSR). The purpose of this complaint was to increase awareness of the threat of bank transfer fraud. They campaigned for amendments to be made to banking policies, which would give the end customer more protection.


As it stands, people who accidentally transfer money to a fraudsters account have no legal right to get their money back, often relying on their bank’s goodwill to try and recover any lost money. This is opposite of the protection offered with card transactions. In response to this complaint, the PSR has been working collaboratively with banks and the industry for the last 12 months. The overall objective for the PSR was to look at how the industry can reduce the harm to customers from push payment scams.


They have finalised their investigation and earlier this month released a public response. In this, the PSR have requested banks and industry must do more to protect their customers. They recommended a need to improve the way banks respond to bank transfer scams and work closer with customers to do more to identify fraudulent payments. This review/payments still doesn’t mean the bank is liable, however, they have recommended a contingent reimbursement model is introduced to reimburse victims. What this means is that any reimbursement of a payment would be considered against what due care and attention were taken when the payment was made. This includes steps taken from the customer and the bank during the payment.
The PSR is continuing to consult the industry on what this looks like and how it should be designed and implemented. The target date to have this model in place is currently September 2018.


Push payment fraud can be prevented with a simple validation exercise.

When it comes to bank transfer fraud it isn’t a complex change that’s needed. It is a simple verification exercise. Systems [such as Experian’s Bank Wizard Absolute] can be used to carry out real-time checks which will dramatically reduce the chances of payment fraud and error. It can be used to confirm that the beneficiary of a payment owns the bank account to which a payment needs to be sent to, providing trust and confidence.


We heard at the start of the year how BACS refreshed their rules too. Why? To add clarity and certainty to the terms. Again, a simple check confirms the details of a direct debit, helping you validate the details and initiate the direct debit being set up. Therefore introducing bank validation can help you with two different mandates.


Tightening controls and combating fraud needs to be considerate of trends but also considerate of the customer journey and experience too. But, as seen in our Experian research report, customers like to see fraud controls in the customer journey. They feel safe. They feel secure. So, if any team can justify adding more to the customer journey, fraud teams can.


You mustn’t dismiss the need for frictionless. You mustn’t dismiss the need for speed and personalisation. But you also mustn’t dismiss the threat of fraud. The threat to your business and the threat to your customers. In turn, the threat to your brand. But, it needn’t be either. Multi-layered fraud, simple checks, API based systems, can mean you can flexibly manage your fraud controls adding and subtracting whenever you deem necessary. This gives you the flexibility to respond to changes such as bank transfer fraud and bring in new solutions to reduce the threat to your customers.


Why wait for a regulation to be brought in? Why not start looking at simple ways to give your customers confidence and security?
Bank Wizard