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Banks (Finance)

Worrying Gaps in Online Banking Security Systems Exposed

Strategic Insights

— 1 min read

Gaps in online banking security systems have been exposed in a new investigation, with consumer organisation Which? raising concerns that some banks are unfairly denying reimbursement to scam victims. The issue has been highlighted by Gareth Shaw, Head of Money at Which?, who notes that while banks have marketed themselves as caring and sentimental businesses, they often fail to protect customers when they fall victim to bank transfer scams. The investigation found that lax security measures from some banks and building societies could be granting criminals the tools to carry out this type of crime, and that some banks are considering watering down the voluntary code's standards on reimbursement.

Key Takeaways:

  • The voluntary code, implemented in 2016, pledges to reimburse customers who have fallen victim to certain types of fraud, but some banks are unfairly denying reimbursement.
  • The code was based on the assumption that the victim should be reimbursed, and only in a limited number of circumstances should banks reject a customer.
  • In some cases, banks are blaming the customer for missing often inadequate warnings on their websites, undermining the protection offered to consumers.
  • Figures from UK Finance show that of the £126.5 million lost to authorised push payment (APP) fraud in the first half of 2020, just 38% of the total was returned to customers.
  • Research from the Payments Systems Regulator found that one bank was fully reimbursing customers just 1% of the time.
  • The reimbursement rates for all the major banks signed up to the code are known to the industry and the payments watchdog, but neither will reveal them.

Statistics:

  • £126.5 million: the amount of money lost to authorised push payment (APP) fraud in the first half of 2020.
  • 38%: the proportion of the total £126.5 million lost to APP fraud that was returned to customers.
  • 1 in 100: the percentage of cases where one bank was fully reimbursing customers.
  • £[pounds sterling]5.3 million: the average amount of money lost by each victim of APP fraud.
  • 2020: the year in which the payments watchdog and industry discovered that the reimbursement rates for all major banks signed up to the code were known, but not being revealed.

Sources:

  • The Herald
  • UK Finance
  • Payments Systems Regulator
  • Which?
  • Lending Standards Board

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