October 11, 2018

Financial services fraud: a threat on all fronts

financial services bank fraud scam

The digital revolution has radically transformed the way we manage our money. Sending and receiving funds is now quicker and easier than ever before thanks to an influx of online and app-based services.

But with convenience comes the need for caution. Criminals now have countless opportunities to scam consumers out of their hard-earned cash and as fraud becomes increasingly sophisticated, even the savviest amongst us might struggle to identify an attempted scam.

Scammers stole more than £500m from UK bank customers in the first half of 2018 alone. As much as £145 million was lost through authorised push payments, where people are duped into sending payments to the wrong account. Worryingly, this type of fraud has risen 44% annually.

With the head of one of Britain’s biggest banks last week admitting he can’t always tell the difference between genuine and fake texts, it comes as no surprise that many are falling victim to fraud. But what is the financial services industry doing about it?

Fighting fraud

In 2016, consumer group Which? lodged a super-complaint raising concerns over push payment fraud. It argued banks are not taking adequate measures to address the risks of consumers being scammed and are unfairly placing liability on the consumer.

With banks in the spotlight, addressing financial fraud quickly became a reputational issue.

Since then, the industry has visibly increased efforts to warn consumers about the risk of scams. For example, Barclays recently launched a £10 million digital safety advertising campaign, while Santander is issuing warnings to customers in-branch.

Though arguably an enabler, technology is also the first line of defence in preventing scams from being successful, with banks like HSBC investing in artificial intelligence to help spot fraud and money laundering.

Meanwhile, UK Finance has collaborated with the Home Office to launch Take Five to Stop Fraud, a campaign designed to help consumers spot the tell-tale signs of a scam.

Communications strategies are key in the battle against fraud

Despite these measures, horror stories of consumers – particularly the elderly and vulnerable – being swindled out of their life savings continue to emerge in the press. When a bank refuses to refund the money lost (though they are not obligated to do so if the victim has authorised the payment themselves), it frequently provokes outrage and inflicts potentially significant reputational damage.

A regular drumbeat of communications activity from financial institutions on the topic of fraud is vital, not just to reinforce messages around the measures being put in place to prevent it, but to give as much exposure to the issue as possible to prevent more customers from falling prey to fraudster’s tricks.

A good example of this is digital bank Monzo’s “extraordinarily candid” decision to invite the Guardian to witness the scams its customers are subject to. This not only exposed and improved awareness of the types of scams threatening consumers, but also evidenced the good work Monzo is doing to prevent these from impacting its customers, giving the bank a reputational boost.

Fraud is a threat on all fronts, inflicting both financial and reputational damage. Organisations must adopt a transparent and informative communications strategy dedicated to this issue to protect their brand, reassure customers and arm them with the knowledge needed to effectively protect themselves against financial fraud. Failure to do so will only help fraudsters to continue inflicting untold damage.