Social media groups need to step up their efforts in the battle against financial fraud on their platforms, according to the UK payment regulator. The Payment Systems Regulator (PSR) has suggested that ministers should consider holding social media platforms accountable for compensating victims of fraud. David Geale, interim managing director of the PSR, stated that a recent scheme forcing banks to reimburse victims was just one part of an ongoing fight against fraudsters. Geale believes that more can be done at the point of origination, particularly by social media companies and internet service providers. He described it as a “war of attrition” and emphasized the need for a comprehensive approach involving all stakeholders.
The PSR recently introduced rules making payment providers liable for losses resulting from authorized push payment (APP) fraud, where individuals are deceived into transferring money from their bank accounts. Under these rules, banks are responsible for reimbursing victims up to £85,000 ($116,000). Geale acknowledged that imposing a levy on tech companies to cover scam-related costs or fund law enforcement efforts would be complex but suggested it should be considered by the government.
Last year, UK bank TSB reported that 80% of its main fraud cases originated from social media services such as facebook-owned platforms like WhatsApp and Instagram. Additionally, industry body UK Finance found that 76% of push payment fraud begins online.
Geale welcomed Meta’s plans to expand its partnership with banks in sharing transaction data as an effort to prevent scams. However, he likened tackling this issue to playing “whack-a-mole,” as blocked fraudsters tend to resurface elsewhere online. Sharing data between tech groups and banks with law enforcement agencies could help eliminate criminals from the system entirely.
According to UK Finance figures cited by Geale, Britons lost £460 million ($628 million) due to APP fraud last year alone. The losses have significant financial and mental impacts on affected individuals.
The introduction of reimbursement rules followed intense lobbying by the payment industry concerned about high compensation costs potentially driving smaller fintech firms out of business. The PSR reduced the compensation limit from £415k ($566k) down to £85k just before implementing this policy after facing backlash from former City minister Bim Afolami and finance industry representatives.
Geale denied any political pressure influencing this decision and stated it was based on evidence showing that most APP claims fell within the £85k limit set by regulators.
Critics argue that this regime may lead to an increase in complicit fraudulent activities where scammers pose as victims or use intermediaries for filing fake compensation claims.
The PSR has committed itself to conducting a formal review one year after implementing these new regulations. Its success will be evaluated based on whether it reduces instances of fraud claims while increasing customer compensation without resorting to appeals through regulatory bodies like Financial Ombudsman Service.
