APP fraud (Authorised Push Payment) losses are on the rise and expected to climb to $5.25 billion across the US, UK and India by 2026 — a record CAGR of 21% — according to Scamscope, a new report by ACI Worldwide.
The term describes a method of fraud in which criminals coerce legitimate users to initiate a payment to a destination account under their control. Funds leaving legitimate customers’ accounts will travel through one or several mule accounts before being collected by the fraudsters or converted by them into hard-to-trace digital assets, such as crypto or non-fungible tokens (NFTs).
In many cases, this happens via social engineering across social media networks or via telephone. The growth of real-time payments has given rise to this new type of fraud, which in many markets is growing at a much faster rate than card fraud.
Plenty of room for scams to grow
Forecasts predict that, by 2026, real-time payments will be at the heart of the new global payments landscape, accounting for a quarter of all electronic payments globally (up from 18% in 2022).
This growth will provide further opportunities for fraudsters, but also additional motivation to shut them down.
The Centre for Business and Economic Research found that in 2021, real-time payments facilitated $78.4 billion of formal GDP across 30 selected markets, and that number is forecasted to reach $173 billion in 2026.
Clearly, fighting back on APP scams is essential to maintaining confidence in real-time payment systems and maximising their economic benefits.
Financial institutions emitting and receiving real-time payments have complementary perspectives of risk and should share accountability to protect consumers.
Success depends on robust technology solutions that drive AI and machine learning-enabled profiling of both positive and negative transactional behaviour (outgoing or incoming), identifying anomalies and risks at the scale and speed of this new digital payments era.
Success also requires recruiting, developing and retaining the talented fraud experts, analysts and data scientists — both customer and vendor side — who collaborate daily to optimize fraud defences across multiple channels while maximizing winning customer experiences.
Scamscope also sheds a light on the types of APP fraud, with product (37.8%), romance (18.4%) and investment scams (16.3%) being the most common across all three geographic markets.
On the flipside, the overall growth of real-time payments is predicted to outstrip the growth of APP fraud losses.
In 2021, APP fraud losses amounted to $2.7 billion, accounting for 0.047% of the total value of real-time payments across the three markets in the study ($5.8 trillion).
In 2026, they are expected to amount to $5.25 billion, accounting for 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 is expected to grow faster than the risk of loss and that many banks, central infrastructures, and regulatory bodies are taking the necessary steps to combat the threat.
“APP fraud is on the rise, and despite many banks stepping up their fraud prevention efforts, this is an issue they can no longer solve on their own,” comments Cleber Martins, head of payments intelligence and risk solutions, ACI Worldwide.
“APP fraud does not happen in silos. To contain and stop this kind of fraud, a detailed and holistic view of all payments activity is needed. Financial institutions, social media giants and telco companies need to work together to stop fraudsters in their tracks before the fraudulent transactions take place.”