As payment technologies expand, so does fraud. Now, payment fraud knows no geographical boundaries. In fact, some countries offer a glimpse into new types of fraud that is sure to impact other countries. For example, the UK has noticed an increase in what is called authorized push payment fraud. New statistics from UK Finance found 19,000 victims of authorized push payment scams that totaled more than £100 million ($130 million) just in the first six months of 2017. This article provides an overview of authorized push payment fraud and how it is being handled by individuals, businesses, and regulators.
What is Push Payment Fraud?
Fraudsters commit this crime by convincing a business or individual to send money for what seems like a legitimate invoice. It may even come from an email address that the business or individual recognizes, such as a supplier. These criminals have become so clever, they can make the online invoices look as they normally appear, including logo and format. Also, they will call customers and get the information that way.
The push payment part comes when the bank receives instructions and authorization to send money to a different account. Later on, the customer realizes it wasn't a legitimate invoice and their real-time payment has gone to criminals. Going further, some fraudsters have even figured out how to take over a customer's payment system and send money to new payees that the customer doesn't even realize they are paying until they look at their bank account after the fact.
Technology to Blame
Unfortunately, technology has brought better convenience and more fraud. More mobile and online technologies, and greater reliance on online banking, are to blame for the rise in authorized push payment fraud. Criminals can use this technology and its vulnerabilities to intercept information.
Plus, they can use phishing and social engineering tactics to get the rest of the information they need, including convincing a business to alter their bank account details with new account numbers. Although it seems hard to imagine that someone would fall for it, this type of fraud happens frequently.
With everyone's desire for fast, convenient transactions, this form of fraud is easy to miss. It's literally a "take the money and run" crime. Businesses and individuals are paying less attention to transactions and just trusting that the payment process works.
Handling Push Payment Fraud
Unlike other types of fraud, such as chargebacks where the bank takes the liability and loss, authorized push payment fraud falls squarely on the shoulders of the customer who authorized that payment -- even if that payment now turns out to be fraudulent.
A good example of where push payment fraud is creating financial distress is with property transactions. Imagine a home buyer who has used their life savings to buy a home. They do an authorized push payment but the money ends up in a fraudulent account. No matter what, they can't get the money back.
However, with this type of fraud on the rise, formal complaints in the UK have been issued against the Payment Systems Regulator in order to make the necessary changes so businesses or individuals are not financially impacted. Now, the UK government is working on a policy framework that addresses this new type of fraud. They are researching how banks and businesses can help each other rather than place blame.
Besides more education, awareness, and regulation, other potential solutions have been to leverage artificial intelligence. Using machine learning, this technology can sift through enormous amounts of data in a matter of seconds. This allows it to make more informed decisions in real time about whether a transaction is legitimate. AI has the potential to become a viable solution for this type of fraud. As it understands more about human behavior, AI functionality in payment systems will recognize questionable transactions and stop fraud.
Until then, businesses and individuals will have to be more proactive. This means paying attention to each online transaction, including all invoices they receive through their email for payment. Also, countries, payment innovators, and consumers can work together to beat criminals at their own game. However, this will require more vigilance and proactive education measures because this type of fraud is just beginning to spread to the U.S. and other countries.