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The relentless storm of bad news about fraud won’t stop.
Whether it’s a JD Power survey claiming 1 in 3 Americans suffered debit card fraud last year, news from Outpayce that disputed transactions in the travel sector are up by a third in 12 months or Verifi’s claim that more than half of European merchants saw a rise in the number attempted frauds in 2023 – the crime just keeps coming.
So what’s the answer?
Last month, the UK government published a new anti-fraud strategy setting out a 50-point programme designed to cut online fraud by 10% by 2025.
That might sound modest, but if that goal were met it would reverse a trend in the opposite direction that has seen UK fraud losses hit £2.5 billion last year, according to UK Finance, with 64% of businesses affected.
Elements of the UK’s plan seem practical and fair, such as helping banks to slow down the processing of suspicious payments and forcing tech companies to protect their customers through legislation (presumably liability shifts).
That said, there’s a fair amount of waffle, too, about “facilitating better communications” and the like.
Meanwhile in Brussels…
Meanwhile in Brussels, the European Banking Authority (EBA) has weighed in, arguing that money laundering and terrorist financing risk in payments institutions are not being managed effectively.
The EBA’s review of financial institutions’ AML and terrorist financing strategies suggests banks’ current approaches are inadequate, with internal controls insufficient to prevent problems in spite of the high AML risks in the sector.
“Excuses that regulators don’t understand payment methods have been used to mask failures.”
The EBA also says not all competent authorities are doing enough to ensure effective supervision.
As a result, payment institutions with weak AML controls can operate in the EU, establishing themselves in countries where supervision is less stringent then use the EU’s passporting scheme to operate across the bloc.
Chrisol Correia, Chief Strategy Officer at Facctum, says: “For too long, the excuse that regulators don’t understand new payments technologies has been used to mask failures to meet sanctions, terrorism financing and money laundering laws.
Operators must make an honest assessment of risks and take action, and there are plenty of technology options that fit their business models.”
Payments Cards & Mobile Opinion
Talk of fraud strategies and technology solutions sounds great, but at some point there will need to be industry-wide efforts (rather than individual bank efforts) to cut fraud losses.
If this doesn’t happen, the risk is a catastrophic loss in confidence, especially in terms of online commerce.
Experience says it can be done: after all, card-present fraud was once the bane of this industry, and it now accounts for crumbs of the overall fraud cake.
Most recently, we’ve seen draconian measures such as banning politically exposed persons from holding bank accounts and a huge reduction in the availability of cross-border banking to kill fraud off.
Let’s hope that current measures are effective, and further big blows aren’t necessary to cut fraud losses. However, one senses it’s going to take more than technology strategies to cut what remains a persistent and increasingly pervasive menace.
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