Analysis by Equiniti, the FTSE listed FinTech and regulatory services business, shows the lack of protection when consumers are scammed into authorising a ‘push’ payment compared to other forms of payment. Typically these scams involve bogus online purchases or the transfer of fees to fake accounts. Payments lost during house purchases have been high profile examples of the latter.
Payments made by credit or debit card provide consumers with greater protection when shopping because consumers can reclaim losses if something goes wrong, provided they have not acted negligently. So if an order never arrives or a vendor disappears after payment, shoppers may still get their money back from the lender.
The risks around ‘push’ payment fraud is growing as developments in payment services accelerate and consumers demand more convenient payments. Faster Payments processed nearly £1.2 trillion worth of payments in 2016 – more than the combined value of credit and debit card transactions – and 150 billion more transactions than the previous year.
The table below exhibits the varying convenience, payment volume and protection features of the most common ‘push’ and ‘pull’ payments, indicating the vulnerability consumers face when authorising ‘push’ payments:
The speed of Faster Payments means there is little opportunity for consumers to block fraudulent activity, in the same way a cheque can be ‘stopped’ in the three days or so before it is cleared by the bank. Consumers are often unaware of the risks they are taking when making ‘push’ payments to unknown, or impersonated, payees and are left distressed by the damaging consequences that they can face.
While banks have a duty to attempt to trace the destination of the money this is no guard against fraudsters who can set up multiple accounts, withdraw the money as soon as it enters the account and then vanish.
Consumers, banks and regulatory bodies remain in the dark over the scope and scale of this type of fraud, relying on anecdotal evidence rather than concrete statistics. Until this improves, consumers will have to remain vigilant to avoid counting the cost of ‘push’ payment fraud.
Stuart Robb, CEO at EQ Data, said:
Cybercrime and payment fraud are becoming increasingly prevalent, as criminals are becoming emboldened and opportunistic. It is crucial that all consumers and businesses exercise caution when transferring money and, where possible, make the most of additional protections available.
Ultimately, the consumer must take responsibility and exercise due caution when making ‘push’ payments, preferably only transferring money to friends and family, or businesses that are able to verify their identity. Emails and phone calls requesting payment should be treated with immediate suspicion and verified. If possible, transactions should be made by credit card to gain the highest level of security.
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Section 75 of the Consumer Credit Act 1974 says that for consumers who pay for something costing between £100 and £30,000 on a credit card then the card provider is equally liable for any ‘misrepresentation or breach of contract’ as the seller
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Equiniti is a specialist outsourcer delivering technology-enabled solutions to some of the best-known brands and public sector organisations in the UK, including c.70 of the companies in the FTSE 100. It is the UK’s leading provider of share registration and associated investor services, and also has market leading positions in administration of employee share plans, pension administration and software, and employee benefit schemes. Equiniti's services, which are delivered by over 4,300 employees, benefit 28 million people in the UK and 120 countries around the world.