HSBC has highlighted the need for tech firms to share the burden of reimbursing victims of fraud, stating that new UK compensation rules, which will require banks to reimburse scam victims up to £85,000, will not sufficiently curb fraud cases.
David Callington, the head of fraud at HSBC UK, asserted that while the incoming regulations would prompt banks and payment firms to enhance their fraud detection systems, these measures alone would not substantially reduce scam cases across the UK. He emphasised that the financial burden should also fall on other sectors, particularly tech and social media companies, which facilitate the majority of authorised push payment (APP) scams.
APP scams, where individuals are deceived into transferring money to accounts operated by criminals, have seen a significant rise, with losses totalling £459.7 million in 2023. There were 232,429 cases last year, as disclosed by UK Finance. These scams are predominantly perpetrated through text messages and fraudulent online advertisements on platforms like Instagram, Google, TikTok, and Facebook Marketplace.
Callington stressed the necessity of holding the wider ecosystem and its key players accountable. He argued that while banks must be vigilant, financial obligations should be distributed across all sectors involved. He contended that a financial incentive is essential for sectors beyond banking to take action.
Despite the UK government’s efforts to mitigate online fraud through a voluntary online fraud charter, which tech and social media firms are encouraged to sign, Callington argued this approach is insufficient. He urged for these obligations to be codified into law, thereby compelling large tech and telecom companies to compensate customers when their preventative measures fall short.
Callington warned that regulators would only intervene when voluntary measures fail to deliver the desired outcomes in fraud prevention. The Payment Systems Regulator (PSR) is set to enforce mandatory reimbursement of up to £85,000 from 7 October, as most firms did not adopt the voluntary industry code introduced in 2019 consistently.
Tech firms, represented by lobby group techUK, have defended their stance, claiming they have rapidly implemented the voluntary charter and are keen to collaborate with banks, law enforcement, and government to combat online fraud. A techUK spokesperson stated that extending reimbursement responsibility to tech firms would be neither effective nor proportionate and emphasised the importance of joint efforts to develop better technical solutions and prosecute fraudsters.
From October, the costs of fraud will be equally shared by banks and payment firms on both sides of the transaction, potentially impacting firms that frequently manage fraudulent funds, including smaller entities such as PayrNet, Modulr, Zimpler, and Kroo. The PSR abandoned plans for a higher reimbursement cap of £415,000 after receiving pushback from banks, fintech companies, and politicians, determining that the £85,000 cap, which covers 99% of claims, would be adequate.
A Treasury spokesperson reiterated that reimbursement for APP scam victims is within the PSR’s purview, highlighting that the recent consultation announcement reflects the regulator’s commitment to balancing victim protection with industry impact.
In conclusion, HSBC’s call for broader financial responsibility across sectors in fraud cases underscores the complexity of effectively mitigating online scams. The debate over regulatory versus voluntary measures remains contentious, with significant implications for both financial and tech industries.