APP fraud victims face £3 billion compensation shortfall

Victims of Authorised Push Payment (APP) fraud face a £3 billion shortfall in compensation according to new Fraud Tracker figures from secure payments solution Shieldpay.

Some 4.2 million1 people in the UK have been caught out by scammers at some point in their life through APP fraud. APP fraud happens when someone is tricked into moving money from their own bank account directly into that of a fraudster. On average victims of APP fraud are left £1,387 out of pocket. It’s women who suffer greater financial loss at the hands of fraudsters being conned out of, on average, £1,779. Men are, on average, defrauded by £1,125.

The Shieldpay research reveals that victims of APP fraud who contact either their bank, building society or payment provider receive less than half of the total scam value back, just 48%. This means victims face a shortfall of £3 billion2 pounds in compensation received. 15% of people receive no compensation at all.

Shieldpay protects people when they are transferring money to an individual or business they don’t know. Shieldpay’s patent pending payments process fully verifies the identity of both sides of any transaction, holds funds securely and only releases them once both parties confirm they are happy.

Fraudsters adopt a number of different methods when trying to part people from their money. Victims are most likely to be targeted by fraudsters over the phone (27%), followed by social networking sites (22%). Over one in five (21%) victims are contacted in person by doorsteppers, 16% by clicking on a fake ad, 15% when making a purchase online and 12% on an online dating site.

While the industry fails to stop innocent people becoming victims it is taking steps to reduce the number of consumers left out of pocket by APP fraud. A voluntary code introduced in May 2019 is designed to improve levels of compensation by banks. Yet just 46% of people have heard of it and 27% of these, despite having heard about it, don’t understand it at all.

Peter Janes, CEO and Founder at Shieldpay, said: “Blameless victims of APP fraud are being left thousands of pounds out of pocket while fraudsters continue to let the good times roll. It shouldn’t be this way; the industry must do more to protect consumers.

“The voluntary code introduced last year is a positive step but compensating victims is simply firefighting without tackling the source of the problem. Fraudsters must be stopped in their tracks and consumers protected against transferring money into accounts which are held by scammers.

“Full identity verification and background checks, which raise red flags about a business’s or individual’s history, are the only way to make a dent in the sky-high levels of fraud the country is currently experiencing. The technology exists but it’s the responsibility of the individuals and the payments industry, including online marketplaces and banks, to put it in place.”