As digital transactions become increasingly prevalent, fraud schemes like fraud are escalating, leaving consumers vulnerable. This article addresses the pressing need for advanced protective measures against such scams.

• A detailed examination of the rising threat of APP fraud
• An overview of Mastercard’s enhanced Consumer Fraud Risk (CFR) solution and its new features
• An assessment of early results and future expansion plans

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Authorized Push Payment (APP) fraud is becoming increasingly prevalent, often initiated through misleading websites, emails, texts, or phone calls. This type of scam caused UK consumers to lose an alarming £460 million (approximately US$615 million) in 2023 alone.

The severity of this issue has led to regulatory measures, with the UK’s Payment Systems Regulator (PSR) planning to implement new rules on October 7, 2024. These rules mandate that banks reimburse victims of APP fraud in most circumstances.

Launched in early 2023, Mastercard’s Consumer Fraud Risk (CFR) solution utilizes artificial intelligence to assess various data points related to transactions. This robust system offers:

• Real-Time Risk Analysis: Provides risk scores to the sender’s bank almost instantaneously, enabling prompt decision-making.
• Fraud Prevention: Empowers banks to detect potential fraudulent activities and suspend suspicious payments before they are completed.

The recent upgrades to the CFR system extend its functionality to banks receiving payments. These institutions now have the capability to:

• Receive Quick Risk Assessments: Obtain risk scores within seconds to identify if a payment is linked to a ‘mule’ account, which refers to accounts exploited by fraudsters.
• Improve Detection Rates: Significantly enhance their ability to flag suspicious transactions early in the payment process.

“Fraudsters have long sought to deceive the consumer through scam websites and fictitious deals. That’s why, at Mastercard, we are turbocharging our technology, providing banks additional lines of defence – helping them better identify and stop scams in their tracks.”

Mastercard has reported positive early results from offline trials of the new ‘inbound risk’ alerts, showing a 60% improvement in banks’ capability to identify high-risk mule accounts within their networks. Furthermore, data from 14 of the UK’s largest banks reported a 12% decrease in the total value of APP scams, down from £389 million (US$520 million) to £341 million (US$456 million) throughout 2023.

The company is committed to broadening the reach of its Consumer Fraud Risk solution globally within the year, aiming to enhance consumer protection and foster a more secure digital financial environment.

Tools like Mastercard’s CFR are expected to play a critical role in the continuous fight against fraud. Johan Gerber states: “We are turbocharging our technology, providing banks additional lines of defence – helping them better identify and stop scams in their tracks.”

This expansion follows the introduction of Mastercard’s Decision Intelligence Pro, another advanced consumer protection tool leveraging Gen AI. This transaction risk assessment tool evaluates relationships among various parties involved in a transaction, highlighting Mastercard’s dedication to ensuring consumer safety.

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– In 2023, UK consumers lost nearly £341 million (approximately $433 million) to Authorized Push Payment (APP) fraud, a 12% decline in value from 2022, but with a 12% increase in the volume of cases to 252,636.

• Alternatively, some reports indicate the total losses were £459.7 million in 2023, with 232,429 cases reported.
• The reimbursement rate for APP fraud victims improved to 67% in 2023, up from 61% in 2022.

• In 2022, APP fraud losses were higher, with £389 million (US$520 million) lost and 224,603 cases reported.

• The UK’s Payment Systems Regulator (PSR) is set to implement new rules on October 7, 2024, mandating banks to reimburse victims of APP fraud. Initially, the maximum reimbursement was set at £415,000, but this has been proposed to be reduced to £85,000 following a consultation.
• There has been an inconsistent approach by firms in reimbursing victims, with only the sending firm currently making reimbursements, ignoring the role of receiving firms.

• The proposed reduction in the reimbursement cap from £415,000 to £85,000 could significantly impact victims, particularly those who suffer substantial losses, such as from investment scams or large transactions like home purchases.
• The new reimbursement rules may increase costs and friction for real-time payments and could decrease investment in the UK FinTech market due to higher risks and lower profitability.

• David Geale, the PSR’s managing director, noted that while there are positive changes with more victims being reimbursed, there is still more work to be done, especially for smaller firms which have higher rates of receiving fraud.
• Consumer advocacy groups, such as Which?, have strongly criticized the proposed reduction in the reimbursement cap, arguing it could lead to devastating consequences for some individuals.
• Riccardo Tordera-Ricchi from The Payments Association warned that the new rules will increase prudential risk and costs for participating in the UK payments market.

Authorized Push Payment (APP) fraud is a type of scam that often begins through misleading websites, emails, texts, or phone calls, tricking consumers into authorizing payments. In 2023, it resulted in UK consumers losing around £460 million (approximately US$615 million).

The UK’s Payment Systems Regulator (PSR) is set to implement new rules on October 7, 2024, which will require banks to reimburse victims of APP fraud in most cases. This change aims to enhance consumer protection against fraud.

Mastercard’s Consumer Fraud Risk (CFR) solution, launched in early 2023, utilizes artificial intelligence to evaluate transaction data points, providing:

• Real-Time Risk Analysis: Delivers almost instantaneous risk scores to the sender’s bank for quick decision-making.
• Fraud Prevention: Helps banks detect and suspend suspicious transactions before completion.

The enhanced CFR system now enables banks to:

• Receive Quick Risk Assessments: Get risk scores within seconds to ascertain connections to ‘mule’ accounts.
• Improve Detection Rates: Enhance the ability to spot suspicious transactions early in the payment process.

Mastercard’s initial trials indicated a 60% improvement in banks’ capacity to identify high-risk mule accounts. Additionally, data from 14 major UK banks showed a 12% decrease in the total value of APP scams in 2023.

Before the introduction of the CFR, the total value of APP scams was approximately £389 million (around US$520 million£341 million (about US$456 million).

Mastercard plans to expand the reach of its Consumer Fraud Risk solution globally within the year, aiming to bolster consumer protection and create a more secure digital financial environment.

According to Mastercard, their technology is being turbocharged to provide banks with additional layers of defense, enhancing their ability to identify and prevent scams quickly.

Mastercard has also introduced Decision Intelligence Pro, a tool that leverages Gen AI to assess transaction risks by analyzing relationships between all parties involved in a transaction.

The surge in APP fraud cases leading to significant financial losses, alongside evolving scam tactics, necessitates immediate and robust measures. Regulatory changes and innovative technologies, like those from Mastercard, are essential in enhancing consumer safety.