Vertical Markets

Transfer fraud call

by Mark Rowe

Some of Britain’s biggest banks are refusing to reimburse blameless victims of devastating transfer fraud, despite new industry standards intended to protect fraud victims, says the consumer rights campaigners Which?.

Which? has heard from people who say they have been denied reimbursement unfairly – with what Which? sees as a worrying trend emerging of banks relying on fraud warnings to justify not refunding customers. These decisions from banks fly in the face of the voluntary code most banks have signed up to, which pledges to reimburse all blameless victims.

It is now much more common for online or mobile banking customers to see fraud warnings when transferring money, as banks seek to meet new code standards by introducing a range of features aimed at making a customer think twice about whether they are being scammed. Which? found that almost half (49pc) of people are not even aware that new fraud warnings had been introduced by banks.

Which? – working with two academics – also analysed the effectiveness of banks’ fraud warnings, to see whether they are adequately ‘understandable, clear, impactful, timely and specific’ – as set out in the code.

One researcher voiced concerns over the ‘generic’ messages displayed by First Direct, HSBC, Lloyds, Natwest and Royal Bank of Scotland. Petko Kusev, from Huddersfield Business School, said that it was perfectly rational for customers to ignore generic information when conducting bank transfers. A second researcher, Patrick Fagan from Goldsmiths, University of London, suggested that some warnings can come too late, as once people have already been targeted by scammers they typically commit to seeing the action through. Fagan suggested that banks use targeting and personalisation to make these warnings more persuasive.

Which? says that it supports the introduction of fraud warnings as an important defence in preventing scams. However, Which? believes that banks must prove their fraud warnings are fit for purpose and should not be used as a means to simply deny reimbursing blameless victims. If a bank can’t prove its warnings are effective then the customer should not be deemed at fault.

Jenny Ross, Which? Money Editor, said: “People are losing life-changing sums of money every day to devastating bank transfer fraud – so it’s shocking that some current account providers still haven’t signed up to offer their customers vital protections. All banks must prove that their online warnings are up to scratch – especially if they are denying victims reimbursement, as we’ve seen in some cases.”

Comment

Joe Bloemendaal, Head of Strategy at Mitek, a digital identity verification product company, said there was no excuse for banks letting customers down when it comes to fraud. “While they may lose money by reimbursing fraud victims, the damage to their reputation and customer loyalty is much worse. Rules or no rules, not acting soon to stamp out fraud could be catastrophic.

“In such a tech-driven financial world, banks should do everything they can to stop fraud happening in the first place. It’s true that technology has enabled new instances of fraud to emerge, but the right technologies can also be the cure.

“With the rise of deepfakes and more sophisticated fraud happening every day, countering the problem comes down to being 100pc certain that customers are who they say they are. Verifying the identities of each and every customer during the onboarding process is critical to making this a reality. A combination of AI and human expertise can verify customers’ identities – for example by comparing a selfie and a photo of their passport. By putting the right technology in place sooner rather than later, banks can avoid fraud losses happening in the first place – for the good of their customers and their own future.”

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