According to a new report "Scamscope" from ACI Worldwide and GlobalData, the amount of property lost to APP fraud is on the rise, and it is estimated that by 2026, Losses in the US, UK and India will climb to $5.25bn - a record compound annual growth rate of 21 per cent.

APP fraud scams involve scammers tricking victims into voluntarily making large bank transfers to them - in most cases, this happens via Internet or phone communications. The growth of online real-time payments has given rise to this new type of fraud, which is growing much faster than credit card fraud in many countries and regions.

Scamscope also revealed the types of APP scams: products, for example, accounted for 37.8%; Love fraud, 18.4%; Investment fraud accounted for 16.3 percent. These three types of scams are the most common in the financial markets of the United States, Britain and India.

On the other hand, the overall growth in real-time payments is expected to outpace the growth in APP fraud losses. In 2021, APP fraud losses amounted to $2.7 billion, or 0.047 percent of the total value of real-time payments in the three markets studied ($5.8 trillion). By 2026, they are expected to reach $5.25 billion, representing 0.0025% of the total value of real-time payment transactions in 2026 ($20.7 trillion). This means that real-time revenue for financial institutions will grow faster than the risk of loss, and many banks, central infrastructure, and regulators are taking the necessary steps to address this threat.

An overview of Scamscope's key findings:

• Estimated APP fraud losses

India: $330 million in 2021 - $612 million in 2026

United Kingdom: $789.4 million in 2021 - $1,564.9 million in 2026

United States: $1,629.4 billion in 2021 - $3,080.6 billion in 2026

• Types of fraud

The most common APP fraud scams in these three markets are:

Product fraud, accounting for 37.8%;

Love fraud, 18.4%;

Investment fraud accounted for 16.3 percent.

• Fraud value

One in five (17%) fraudsters in the UK disguise their activities by focusing on purchases between £251 ($291) and £500 ($579).

The value of fraudulent transactions in the United States tends to fall in the range of $251 to $579 and, more broadly, $2,500.

A quarter (25%) of fraudulent transactions in India were worth between INR 50,001 ($607) and INR 100,000 ($1,217).

The report Outlines four main recommendations for financial institutions to address this issue:

Banks must stay ahead of upcoming regulatory changes and strengthen and optimize processes and technologies to combat APP scams.

Powerful technological solutions are needed to collect more and better customer data - behavioural data is key to tackling social engineering.

Better collaboration: Banks on the originating and receiving end of transactions must work more closely together to better understand where and why money is being sent. This means creating an intelligence network based on real-time sharing of fraud signals in a metadata format.

• Banks must get serious about disrupting mule account networks. That means monitoring the money going in and out of customer accounts and analyzing the behavior of those accounts.

"APP fraud is on the rise, and while many banks have stepped up their fraud prevention efforts, it's a problem they can no longer solve on their own," said Cleber Martins, head of payment intelligence and risk solutions at ACI Worldwide. "APP fraud doesn't happen in silos. In order to deter and stop such fraud, a detailed and comprehensive understanding of all payment activities is needed. Financial institutions, social media giants and telcos need to work together to stop fraudsters before fraudulent transactions happen."

Sam Murrant, senior payments analyst at GlobalData, also noted, "While there are signs that banks are taking the necessary steps to address new fraud threats, they must not take these risks lightly." "In addition to the direct costs of fraud losses, the lack of regulatory protection to compensate consumers for APP fraud losses means that APP fraudsters risk losing trust and, in turn, customers."

Source: FX110