Social media firms should reimburse online fraud victims, say UK bankers

Social media firms should reimburse online fraud victims, say UK bankers

11 May    Finance News, News

The boss of the banking industry body UK Finance has called on social media companies to reimburse victims of online fraud, accusing them of “profiting” from scams taking place on their platforms.

Figures from its fraud report show that 78% of authorised push payment scams, where a victim is tricked into approving a transaction, started online in the second half of last year, with about three-quarters of those beginning on social media.

The chief executive of UK Finance, David Postings, said: “I would note that the banking sector is the only sector reimbursing at the moment, and our belief is that the burden should be spread … I think [tech companies] should be putting their hands in their pockets, particularly as they profit from it.”

Postings welcomed measures in the online safety bill going through parliament that will require tech and social media platforms to remove scam adverts, but said the government had missed an opportunity by not including rules on reimbursement by social media companies in its recently published fraud strategy.

“If we’re going to have a position where people are reimbursed, it seems fair that the tech companies ought to be part of that because, ultimately, that they are currently profiting from the generation of this fraud, and that can not be right,” he said.

Last week, TSB urged social media firms to take “financial liability” for scams occurring on their platforms.

Responding to the UK Finance report, the bank’s director of fraud prevention, Paul Davis, said: “Action from social media firms and phone companies to reduce fraud is also crucial – as these sectors must take more responsibility for their users’ safety.”

The report also revealed that lost and stolen bank and credit card fraud soared last year after the increase of the contactless spending limit to £100 a transaction and more widespread acceptance of the payment method.

The amount stolen by criminals using lost and stolen cards jumped 30% to £100.2m in 2022 – the first time losses from this type of fraud has exceeded £100m. There was also a rise in the number of incidents reported, increasing 23% to 401,343 cases.

“Rises were expected in 2022 given the increases to contactless limits during the pandemic and also the increased acceptance of contactless, which accelerated during the Covid-19 lockdowns,” UK Finance said.

The contactless payment limit more than doubled in October 2021, rising from £45 to £100. Experts had previously warned that the spending limit increase could leave consumers vulnerable to fraud.

As a fraud prevention measure, cardholders making a contactless transaction are occasionally asked to enter their Pin to prove they are in possession of their card. However, the frequency of this varies between card issuers.

Overall, the total amount lost to all types of fraud was down by 8%, the report found, but still reached £1.2bn in 2022.

Unauthorised fraud losses were £726.9m, down by less than 1%, and authorised push payment losses were £485.2m, a 17% reduction.

Protections such as two-factor authentication for online payments and confirmation of payee – where banks match the name of the person a consumer is paying with the one on the account – are helping to reduce fraud, but UK Finance said “too much money is still getting into the hands of criminals”.

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