Authorised Push Payment (APP) scams are an escalating threat to global banking systems. These scams swindle victims into willingly transferring money into a fraudster’s account, masquerading as a legitimate entity. Such deceptive transactions have been historically difficult to track and mitigate due to their voluntary nature. In 2022 alone, APP scams led to a loss of £484.2 million in Britain. If this alarming trajectory persists, the United States and the UK could face APP fraud losses amounting to a whopping $5.25 billion by 2026.
Mastercard’s AI Response to Fraud
In response to this escalating issue, Mastercard has stepped forward with an AI-based solution: the Consumer Fraud Risk system. This tool, honed by years of transaction data, predicts if a bank transfer is bound for an account associated with APP scams. By assigning a risk score to each attempted bank transfer, banks can combine this score with their analytics to assess transactions. If necessary, they can halt the process before the victim’s money is transferred, mitigating potential loss.
Major UK Banks Adopt Consumer Fraud Risk System
Mastercard’s initiative has received an encouraging response from the UK’s banking sector. Nine leading banks, including Lloyds Banking Group, NatWest Group, and Bank of Scotland, have embraced this AI-powered system. The timing coincides with upcoming regulations that require banks to compensate customers affected by APP scams from 2024 onwards.
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Success Stories and the Road Ahead
TSB Banking Group was the first to implement this system and reported a significant 20% increase in detecting APP fraud. The bank estimates that if universally adopted, this tool could potentially save the UK banking industry £100 million per year. Furthermore, it has demonstrated a high success rate in detecting purchase scams, another prevalent form of APP fraud.
Mastercard does charge a fee based on transaction volume for this product however considering the potential savings and improved customer trust, the investment seems promising regardless.
The company is also looking at a global outreach beyond the UK, engaging in discussions with potential clients across markets that grapple with significant APP fraud, including the United States, India, and Australia.
Mastercard’s use of AI to combat APP scams marks an industry turning point. It demonstrates the company’s commitment to securing financial transactions and boosting customer trust. As such, the Consumer Fraud Risk system stands as a testament to AI’s immense potential as a powerful ally in risk detection and fraud prevention.
