The news: UK banks are demanding that Big Tech chips in on fraud victim reimbursement, per The Telegraph.
What are banks saying? Major UK banks including Lloyds, Barclays, TSB, and Santander are specifically calling out Facebook, Google, and other tech and telecom giants for their role in online fraud. The banks believe that the “polluter pays” principle should require these companies to pay into a communal account that reimburses online fraud victims.
Can fraud be stopped? According to Barclays, more than three-quarters of online scams occur on social media, auction sites, and dating sites. Executives at Barclays and at other banks say tech companies involved in the facilitation of the scams should be required to report data on the scams that they identify on their platforms. But the banks also say that the primary goal should be to prevent fraud from happening in the first place.
In the UK, Google and Facebook parent company Meta say they don’t run financial advertisements on their platforms unless they’re approved by the Financial Conduct Authority (FCA).
The bigger picture: For quite some time, banks have been sounding off on the need for companies in other sectors to pitch in on fraud reimbursement. But now they’re taking a more pointed approach and naming specific companies that should be required to chip in.
Meanwhile, in the US, many banks are coming under fire for denying repayment to fraud victims. Many of these incidents result from scams run on peer-to-peer (P2P) payment apps like PayPal and Zelle. Big banks like Wells Fargo, Bank of America, and Capital One face a slew of class-action lawsuits for their unwillingness to reimburse the victims.
The big takeaway: The troublesome 2021 fraud statistics in the UK are likely to prompt regulators to step in. The current voluntary repayment program hasn’t been enough—less than half (47%) of fraud victims have actually been reimbursed through it for their 2021 losses. We expect mandatory reimbursement proposals to pop up soon—and banks are making a strong case for the inclusion of non-banking sectors.
The US will likely follow suit as the Consumer Financial Protection Bureau (CFPB) steps up its vigilance on P2P apps and reshapes its image as a primary advocate for consumers. With online fraud a primary concern in both countries, regulation around how to combat it provides yet another opportunity for the FCA to work hand-in-hand with the CFPB.