Traditional high-street banks were once the primary target, but as neobanks have gained popularity, fraudsters have shifted their focus. Neobanks, such as Monzo, Starling, and Revolut, have become a popular targets for fraudsters in the UK. The UK’s Financial Ombudsman Service (FOS) has reported a significant increase in fraud complaints against these neobanks, even faster than their customer growth in the past three years.
The Rise of Fraud in Neobanks: Why Fraudsters Are Targeting Digital Banks
When neobanks were first established, they were relatively unaffected by fraud. These banks learned from the mistakes of traditional banks and implemented measures to protect themselves against fraudulent activities. However, as fraudsters continue to evolve and find new tactics, neobanks have become more vulnerable.
The rise of Authorised Push Payment (APP) fraud has put neobanks directly in the crosshairs of fraudsters. The FOS confirms that most complaints against neobanks concern APP fraud. Fraudsters are targeting these banks due to their lack of security measures. Traditional banks usually freeze or delay payments while verifying the transaction’s authenticity with the payee. However, neobanks often rely on in-app warnings, which fraudsters can easily circumvent.
Why Neobanks Must Improve Security Measures to Combat Fraud
Fraudsters are now familiar with in-app warnings and even prep their victims on how to respond once they receive the notification. These warnings serve as a hindrance rather than a deterrent to fraudsters. To address this issue, neobanks must improve their security measures and stay up to date with evolving fraud tactics.
The increase in fraud complaints is a concerning trend. Over the past three years, Monzo has witnessed a rise of 73%, Revolut 470%, and Starling 1019% in fraud complaints per million customers. The issue must be addressed to prevent further increases in fraud figures.
Fraud is an ever-evolving entity, and fraudsters continuously find new ways to beat the system. The banking industry must work hard to keep up and stop them. Neobanks, once state-of-the-art in fraud prevention, have failed to evolve at the same speed as fraudsters. This criticism can also be directed at traditional banks that have not adapted to the changing fraud landscape.
How to Report Fraud: Guidance for Victims of Fraud in the UK
Reporting fraud is essential to help authorities catch and prosecute fraudsters and prevent further incidents. If you are a victim of fraud, it is crucial to report it immediately. The UK government’s Action Fraud website provides guidance on reporting fraud and what to do next.
Neobanks have become a popular target for fraudsters in the UK due to their lack of security measures. Fraud complaints against these banks have increased faster than their customer growth, most of which are related to APP fraud. To prevent further increases in fraud figures, neobanks must improve their security measures and stay up to date with evolving fraud tactics. If you are a victim of fraud, it is essential to report it immediately to help prevent further incidents.
