The friction applied to instant bank transfer to slow down payments and protect customers from scams is proving ineffective, according to new research by Tunic Pay, an anti-fraud fintech supporting UK banks in detecting and preventing scams.
Tunic Pay research of 2,000 UK adults, conducted by market research consultancy Opinium, found that only a third (33 per cent) of UK adults say they read their banks’ fraud warnings before making a payment.
The research was published a month after new rules by the Payments Systems Regulator came into effect, requiring all UK banks to reimburse customers who are proven victims of Authorised Push Payment (APP) scams up to £85,000 per case.
While 85 per cent of UK adults are aware of the actions their banks are taking to protect them from scams, it’s those who have experienced a scam before who tend to be more aware (90 per cent) – compared to those who have never been targeted (82 per cent).
Currently, banks are employing a range of methods to reduce losses to fraudsters:
Questions to make sure the user knows who they are paying (43 per cent)
Warning statements about fraud risks (41 per cent)
Requesting biometric identification (38 per cent)
However, Tunic Pay found that only 32 per cent of UK adults believe warnings are helpful because they force them to slow down and think about the payments they are making.
Nico Barawid, co-founder of Tunic Pay, comments: “The PSR’s important new rules have placed more financial burden on banks than ever before to get a handle on the potentially £4billion problem of APP fraud. The banks have channelled huge amounts of money and effort into creating friction to slow down payments and get customers thinking harder about who they’re sending their money to. Is the friction working? Not a lot. If two in three people aren’t paying attention to the warnings they click through, the system is broken and the fraudsters win. Slower payments don’t mean slower fraud.”
Time for banks to adopt smarter measures?
Three-quarters (75 per cent) of UK adults don’t think delaying some payments for up to 72 hours is an effective method of preventing fraud, and a similar proportion (73 per cent) say requiring a customer to call their bank to answer questions about the payment is not effective either.
Customers of online or challenger banks (30 per cent) are less likely to read every warning notice than customers of traditional high street banks (36 per cent), but marginally more likely to say that the warning notices are effective (35 per cent vs 34 per cent).
One in seven (15 per cent) of the survey’s respondents would like to see their banks use fewer warnings and more technology to detect and prevent scams from happening in the first place. This rises to a fifth (21 per cent) of customers of online or challenger banks.
Thirty per cent of UK adults are concerned that warning notices put up by banks during the payment process are a way for banks to shift the responsibility for getting scammed to their clients. This sentiment is more prevalent among older respondents (34 per cent) compared to younger (25 per cent).
Nicky Goulimis, CEO of Tunic Pay, concludes: “Customers are tired of outmoded fraud prevention measures that aren’t working for them. They expect banks to step up with smarter, proactive security measures rather than relying on friction and delays that ultimately put the responsibility on customers. This shift in expectations is a huge opportunity for fintechs and a call to action for banks to prioritise real-time detection and more intuitive safety features.”
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