The fintech industry is currently confronting significant challenges with APP (Authorised Push Payment) fraud, identity fraud, and the emerging threat of AI-enabled fraud, drawing attention to the urgent need for fortified defenses. Insights from The Payments Association’s survey (conducted during this year’s PAY360 event) reveal that APP fraud is predicted to have the most substantial impact on the payments industry in 2024, with identity and AI-enabled fraud also identified as significant concerns.
AI: The Double-Edged Sword
Interestingly, while fraudsters are using AI to enhance their scams, it is also recognized as a critical ally in combating fraud.
AI is increasingly being used as a ‘force-multiplier’ by fraudsters.
The Payments Association emphasizes the need for the industry to leverage AI more effectively in fraud prevention efforts. The association further observes that more than half (57%) of survey respondents believe AI will be the “next game-changer” in the fraud prevention space, indicating a strong faith in technology’s potential to safeguard financial transactions.
Responses and New Measures
The response to the rising tide of fintech fraud involves a blend of technological innovation, regulatory adjustments, and industry collaboration.
For instance, the UK’s recent legislative amendment allowing banks to delay payments suspected of fraud represents a proactive step towards mitigating APP fraud risks. Riccardo Tordera, head of policy and government relations at The Payments Association, elaborates on the nuanced role of AI in fraud prevention:
We have known for years that machine learning is the only thing with the sophistication and the capacity to tackle increasing volumes of fraud, but it’s not a simple case of installing an AI solution and watching it clean up fraud on your system.
As fintech companies brace for the impact of APP fraud, the emphasis on AI and regulatory innovation reflects the industry’s commitment to proactive and adaptive fraud prevention measures.
The survey results show that our focus on APP fraud as a major vector of losses for both business and the general public was correct.
Tony Craddock, director general of The Payments Association
