Authorised push payment (APP) fraud losses have fallen by an estimated £73 million annually, according to a review into the impact of rules requiring banks to reimburse victims. The evaluation report from Frontier Economics, commissioned by the Payment Systems Regulator (PSR), found that even after accounting for increased costs to payment service providers, there is a positive consumer benefit.
What is APP Fraud?
APP fraud occurs when people are tricked into transferring money to criminals for reasons such as impersonation fraud, purchase scams, romance scams, and investment scams. In October 2024, mandatory APP fraud reimbursement rules came into force, requiring banks to reimburse victims unless the customer has been grossly negligent. The protections apply when a transfer is made to and from a UK bank account, with a reimbursement limit of £85,000, although banks can choose to repay higher amounts.
Report Findings
The report stated: “Consumers are better protected overall with an estimated consumer net benefit of £73 (million)/year from improved reimbursement and reduced APP fraud.” David Geale, managing director of the PSR, said: “The evidence is clear – APP reimbursement is working. Payment fraud losses are down, more victims are being reimbursed, and firms are investing in prevention.”
Comparison with UK Finance Data
The new figures follow separate data from UK Finance released in June, which showed APP fraud losses rose sharply last year to £576.4 million – a 19% annual increase. The discrepancy reflects differences in data collection methods. Frontier Economics analysed scam activity by transaction date, while UK Finance uses the date the claim was closed by the payment service provider (PSP). UK Finance noted that there can be long lags between the victim realising they have been defrauded and reporting it, especially for romance and investment scams, which it said are increasing significantly. On average, victims of romance scams make around 10 payments before realising they have been defrauded.
Industry Response
Ruth Ray, managing director of economic crime at UK Finance, said: “Fraud operates on an industrial scale, causing serious harm to consumers and businesses. For certain scams, particularly investment and romance fraud, victims may only realise they have been deceived a long time after the transaction has taken place. Transaction-date data alone will therefore give an incomplete picture of fraud. Only the banking sector reimburses victims, but this is not stopping fraud and it’s clear the underlying problem is still not being tackled effectively.”
