UK’s Banking Protocol Helps Stop $44M in Scam Attempts in First Half of ’21

With the increasing digitization of payments due to the pandemic, it is estimated that over $6 trillion will be exchanged through digital channels by the end of 2021, representing a 40% increase over the past two years.

Related news: Report: AI and Transaction Notifications Help FIs Stop Payments Fraud

This data was gathered in a recent PYMNTS report on authenticated payments, which also revealed that the value of the digital payments market is predicted to reach $10.5 trillion by 2025. Digital commerce, which is the largest segment of this payments volume, is projected to grow more than 40% to hit $5.8 trillion in the next four years.

While these numbers are an indication of a thriving digital economy, this increase in payments volume goes hand in hand with a surge in fraud attacks, as online transactions become entry points for cybercriminals to carry out illegal activities using social engineering schemes such as phishing or advanced artificial intelligence (AI)-aided schemes to breach customer accounts.

As a result, payment fraud losses are expected to exceed $200 billion by 2025 — a significant fraction of the total annual payments volume each year, according to the PYMNTS report, which was published in partnership with U.S. cybersecurity firm LoginID.

UK Finance: Fraud Poses National Security Threat

Trade association UK Finance is sounding the alarm, as the increasing level of fraud in the U.K. has reached a level that makes it a “national security threat.”

According to a recent report from the banking industry lobby group cited in the PYMNTS study, scam attempts totaling £32 million ($44 million) were made between January and June of this year alone, which banks were able to prevent with the help of a rapid scam response scheme known as the Banking Protocol. 

Launched as a group effort between UK Finance, consumer protection agency National Trading Standards and local police departments, the program aims to train bank staff to detect potentially fraudulent activities when interacting with bank customers. Questions related to the origin of funds, for example, can help staff members alert authorities if they feel customers are being scammed or making payments under duress.

Thanks to the initiative, the Banking Protocol was invoked 4,782 times between January and June, leading to the arrest of about 90 suspected cybercriminals during that period, according to UK Finance.

Read more: Two-Thirds of Execs Expect Digital Authentication Investments Will Pay for Themselves

The PYMNTS report further revealed that one of the common fraud methods that has gained popularity in the U.K. is authorized push payment (APP) fraud, which involves scammers tricking bank customers into transferring money from their bank accounts to those of fraudsters’.

A recent study by UK Finance also cited in the PYMNTS report showed that APP fraud losses increased by 5% from the year prior to reach £479 million in 2020, a surge that the study attributed to fraudsters taking advantage of the recent uptake in digital banking to scam customers remotely.

And even though banks were only able to recover less than half of these fraudulent payments, there was a significant decrease in the amount lost compared to the previous year. Overall, £206.9 million ($285 million) were returned to customers, representing a 75% increase over the funds returned in 2019.

To further minimize the hundreds of millions irrevocably lost each year, security experts say that customers must be more vigilant about the people they do business with, and banks must perform complete audits of their payment authentication systems.