UK neobank Monzo trails behind the majority of other UK banks in refunding customers in cases of authorised push payment (APP) fraud in 2023, according to new data from the country’s Payments Services Regulator (PSR). The fresh figures come ahead of a change in UK regulations, which — as of October 7 — will see payment providers required to reimburse victims of APP fraud in claims up to £415k, apart from in limited exceptions.
APP fraud describes cases where perpetrators pose as genuine payees to trick victims into transferring money to an account outside their control. The new PSR findings show that £341m was lost in such scams last year across 252,600 reported cases — a 12% increase in the volume of cases compared to the year prior.
The report, which included APP fraud data on the UK’s 14 largest banking groups for 2023, showed that Monzo fully reimbursed 9% of cases last year — the third lowest among the UK banks listed — while fellow digital bank Starling fully reimbursed 72% of APP claims. Nationwide topped the list for full refunds for victims of these scams, reimbursing 96% of claims.
Tightening up
On top of Monzo’s low reimbursement rate, 131 APP scam payments were sent for every 1m customer transactions made via the bank last year — the second-highest figure among the surveyed payment providers, with Starling the fourth highest with 124 APP payments per 1m transactions. In both cases, this figure represented a reduction in the volume of scams when compared with the previous year, down from 141 APP cases per 1m transactions in 2022 in Monzo’s case, and 127 for Starling.
Rich Bromley, head of fraud and disputes risk at Monzo, tells Sifted that the bank has “stopped 55% more fraud since this time last year”, due to its “commitment to building and leveraging best-in-class technology, while hiring top experts to keep our customers’ money safe.”
He also lays the blame on social media platforms — where many of these scams originate — for not doing enough to prevent fraud.
“Our customers are disproportionately affected by purchase scams, 66% of which originate directly on social media,” says Bromley. “Yet these platforms bear no responsibility for preventing fraud or providing reimbursement for money lost. They need to take decisive action like we are to protect consumers from losing money to criminals.”
Last month, Monzo introduced three new security controls aimed at reducing fraudulent activity.
“APP fraud is a modern-day scourge and we make every effort to protect our customers from it,” a Starling spokesperson told Sifted. “This new data shows that our efforts to fight scammers mean fewer of our customers are being affected by fraud and when they are impacted, we are refunding more of them.”
New regulation
The figures also show that most UK banks stepped up reimbursement levels in 2023, ahead of the new regulation around reimbursement — which was confirmed last June — coming into force.
While most payment service providers will be required to fully refund customers in most cases, compensation can be refused if the customer is deemed to have failed to meet “the consumer standard of caution through gross negligence”.
“Over the coming months, we will be bringing all payment firms into new reimbursement arrangements to give more consistent protection across the board,” says PSR managing director Chris Hemsley. “This is important because we can see from today’s report that this has not always been the case.”
