Santander: Banks must collect more customer data to help them avoid fraud

Santander said banks must do more to protect their customers from Authorized Push Payment (APP) fraud, including by collecting more customer data about who they pay money to.

The pandemic has heralded a boom in APP fraud, where fraudsters trick their victims into voluntarily making large bank transfers, such as by pretending to be a legitimate company, friend or relative.

Fraud shows no sign of abating, with scammers now taking advantage of the cost of living crisis and creating increasingly sophisticated ways to target their victims online.

As of this year, it has become the most common type of fraud, overtaking card fraud for the first time.

Santander is now urging banks to share more data about their customers with each other so they can better identify those who are not who they say they are.

It is also suggested that banks consider introducing additional security checks for high-value online transactions.

Online fraud and scams are now one of the top crimes in the UK, with more than £600m stolen in the first half of 2022, according to UK Finance. More than half of this (£360 million) was the result of APP fraud, also known as purchase fraud.

What is app or purchase fraud?

The APP scam is where the scammer tricks their victims into willingly making large bank transfers to them.

For example, they can impersonate a person from a bank and claim that the person is a victim of fraud by ordering money to be transferred to another bank account.

Other scenarios include scammers posing as a conveyancer and stealing home deposit money, or pretending to be a builder to steal money saved to pay for repairs.

Contrary to popular belief, this type of fraud does not discriminate by age and anyone can become a victim.

Santander’s own data for 2021 shows a 175 percent increase in online shopping fraud among 19-34-year-olds compared to 51-65-year-olds.

Why has APP fraud increased?

One of the main factors is the growth of online shopping and advertising, which gives fraudsters many platforms to find victims.

According to Santander, about 70 percent of APP fraud occurs on social media. Facebook is the biggest source, with 54% of these scams taking place there. Instagram is responsible for 15 percent, while Snapchat accounts for 4 percent.

In addition to online scams, text and call scams remain high. They were especially common during the pandemic.

As more people now shop online, more people are getting home deliveries, and fraudsters are adept at impersonating delivery texts to scam customers.

UK Finance’s Fraud Report 2021 found that telecom fraud persisted even after restrictions were eased.

After APP fraud, investment fraud is the second most common type of fraud.

Fake: Many cases of delivery fraud start with text messages from fraudsters impersonating Royal Mail, DPD and Hermes

In recent years, Britons have turned to investment in the hope of higher returns as interest rates on savings have been low.

This has coincided with the rise of cryptocurrency, an under-regulated sector that has opened the door to criminals and fraudsters.

Last year, Santander customers reported an average of £1 million worth of cryptocurrency fraud each month, with the average investment fraud amounting to more than £13,000.

What else can banks do to prevent fraud?

Santander is calling for more data between banks about the payments being made.

This may include requiring additional information when making a payment, including whether the bank account is a personal or business account; the type of business and the type of product being purchased.

This can help, for example, if a client tried to send a payment to a firm they thought was a lawyer, but it was actually a personal account.

The additional data points, Santander says, will allow banks to determine that a customer was not paying who they intended, allowing them to stop the payment.

The bank also recommends that all payment providers adhere to a specific set of fraud rules. Firms that fail to follow these industry rules, it says, should be held liable for consumer losses.

On top of that, Santander says more thought should be given to whether higher-value transactions made with Faster Payments require additional checks.

It says customers can accept the trade-off that these transactions are slowed down a bit if it means banks can carry out extra checks for fraud.

Santander also says that the government and other industries have a role to play in tackling APP fraud by preventing fraudsters from reaching people in the first place.

For example, it is assumed that when punishing those who commit fraud, attention should be paid to what started the scam.

This could potentially lead to social media platforms that allow fraudsters to take responsibility for victim compensation.

A new report from Santander provides key recommendations that the banking industry, government and other industries should adopt to combat authorized Push Payment fraud

Enrique Alvarez, Head of Everyday Banking at Santander UK, said: “The sheer scale and value of APP fraud can reduce the real impact of these crimes on individual consumers, who can lose not only money, but also their confidence and mental health. deal significant damage.

“Unfortunately, we see this all too often and it’s time we all got our act together. The criminals who commit these scams should not get away with it.

“There are changes that the banking industry can implement, but there are other changes that are clearly beyond the banking industry’s control, such as how fraudsters often reach their victims.

“We all need to come together and solve this problem because the only real winners right now are the scammers.”