UK Finance Fraud Report Results: Banks Face a Perfect Storm of Change

The changes included regulatory requirements, technological advancements like Generative AI and large language models (LLMs), and authorized push payment (APP) scams becoming a global threat. Any one of these factors would be challenging enough to face alone. However, the combination of forces pushes banks toward a critical inflexion point as they seek to protect their customers while delivering exceptional and secure financial services.

In this post, we’ll unpack the findings from the report and the key lessons for banks to adjust to fraud’s new realities.

Key Findings from the UK Finance Fraud Report 2024

Here are the key takeaways from the report.

Takeaway 1. Scam Losses Down

UK consumers lost an estimated £1.168 billion to fraud and scams in 2023, a 4% drop from the losses reported in 2022. 

Losses declined in both authorized and unauthorized fraud categories from the previous year. Authorized fraud, better known as APP scams, saw the most significant decline at 5%, with losses reaching £459.7 million. Meanwhile, losses from unauthorized fraud reached £708.7 million, a drop of 3% over a year.

These trends indicate that banks’ measures to fight fraud and scams are proving effective. They also demonstrate that banks can make progress against fraud and scams by making the right investments in education, technology, and fraud prevention processes.  

The results demonstrate that banks are making progress against fraud threats. Still, more can be done.

Takeaway 2. Fraudsters Shift to Low-Value, High-Volume Tactics

The UK Finance Annual Fraud Report 2024 also found that the types of scams fraudsters use have notably shifted. This latest shift indicates that criminals are focusing on tactics that yield payment over time and volume. 

UK Finance’s report showed the rate of purchase scams increased by 34%, far outpacing any other type of APP scam. Losses for purchase scams reached £86 million, with an average loss of £549 per case. While purchase scams do not yield as high a payout for criminals as other scam types, the increase in reports suggests fraudsters are focusing on lower-value, higher-volume attacks. The lower value of payments makes them more challenging for banks to detect, making these scams appealing.

Takeaway 3. Scammers Play the Long Game

The report also finds that scammers are in love…with romance scams. These long scams can take weeks, months, or even years to build trust with victims. However, UK Finance’s results show that scammers are nothing if they are not patient. 

Romance scams increased by 14% in 2023, with losses reaching £36.5 million, a 17% rise. UK Finance also notes that the number of payments per romance scam case far outpaced any other type of APP scam, with an average rate of 9.5 payments per case (compared to roughly 1-2 payments for different types). 

This high rate of payments shows how romance scams stand apart from other methods. Scammers will exploit their victim’s trust over time instead of looking to cash out once. They might start small by coercing their victim into making small payments under false pretences like help to pay rent or unexpected medical expenses. If they have captivated their victim effectively, they can continue this scheme for long periods, resulting in multiple payments.

Takeaway 4. Unauthorized Fraud Remains Bullish

Banks have also made progress in reducing unauthorized fraud attempts, such as account takeovers and credit card fraud. However, despite a 3% reduction, losses totalled £709 million, and cases reached 2.7 million. 

The most significant unauthorized fraud losses came from Card ID theft, which rose by 53% and resulted in  £79.1 million in losses. Unauthorized purchases using stolen credit card information (card-not-present or CNP fraud) saw the highest level of losses (£360.5 million). The silver lining is that CNP losses declined by 9% last year, the fifth consecutive year of decreasing losses.

Takeaway 5. Fraudster Go Mobile

As consumers increasingly shift to digital banking, fraudsters are following suit. Mobile banking losses saw the highest increase in losses at 33%.

Meanwhile, losses from web-based banking fraud declined by 22%. One possible reason for the rise in mobile banking fraud compared to web-based banking is the rapid rise of mobile banking activity. The massive migration to mobile banking makes it more challenging for fraudsters to pose as legitimate customers on bank websites.

Fraudsters also dialled up their efforts on telephone banking, which increased by 19% (but saw the lowest value of losses). The increase might be linked to the rise of new technologies like Generative AI that fraudsters can use to create voice cloning to deceive biometric controls. New protections and protocols will be needed as fraudsters incorporate GenAI tools into their arsenal.

5 Key Steps to Secure Payments

UK banks deserve praise for their successful efforts to mitigate fraud and scams. However, further efforts are needed, especially if banks want to fulfil their obligations under the UK’s PSR and PSD3 requirements. 

What lessons can banks draw from the UK Finance Annual Fraud Report 2024? Here are a few essential action items to keep payments secure and trustworthy. 

1. Understand user intent

Traditionally, banks have asked if the user has the correct information (login, passwords, OTPs, etc.). But in the age of scams, focusing on a user’s intent is much more important. Intent is critical to understanding if a customer is being manipulated or coerced by a scammer.

2. AI can be leveraged for good as well as bad

As criminals adopt tools like Generative AI, banks must, too. For example, GenAI can generate synthetic data based on fraud and scam patterns. This data can then be used to train experimental detection models. Generative AI can also be used to write rules simply by describing them in plain text and outlining their intended effect, saving time when writing complex code manually. Operational efficiencies such as this all contribute towards a more robust fraud strategy. 

3. Cross-industry collaboration 

Banks cannot tackle the challenge of stopping scams and fraud alone. Partnerships with social media firms, telecom providers, and other tech companies are needed to keep customers safe across all touchpoints.

4. Inbound payment monitoring 

Many banks don’t focus on monitoring money mule risk in real time. As scam liability picks up, inbound payment monitoring will become increasingly important.

5. Stop the mules, disrupt the crime

Inbound payments monitoring is also critical to uncovering and blocking money mule activity within a bank’s system. Stopping money mules has significant implications for disrupting broader financial crime activities. 

Feedzai is proud to sponsor the UK Finance Annual Fraud Report 2024. We firmly support the organization’s efforts to raise awareness of crucial fraud and scam threats to help UK banks make banking and commerce safer for their customers.