Le scams in the fintech sector are increasing rapidly, especially in the UK, where, according to Bloomberg, Revolut, the app-based banking platform, is among the most affected. THE Most common frauds involve authorized push payments (APP), where scammers trick victims into transferring money to accounts they control. In 2023 alone, losses from these scams reached 460 million pounds, while the victims faced significant difficulty getting refunds. Revolut, for example, has rejected thousands of compensation claims, generating a huge wave of complaints.
What are fintech scams?
Le Fintech fraud come in many forms, creating problems for both consumers and financial institutions. One of the most common is the identity theftà, where criminals steal personal data to access accounts or open new ones, making unauthorized transactions. Also very common are Payment fraud, who exploit stolen credit cards or compromised accounts to complete online purchases.
Another frequent pattern is the account theft, often done through phishing or social engineering attacks, which allows scammers to take control of victims' financial accounts. On the credit front, there are the loan fraud, where criminals use falsified information to obtain loans that are never repaid, harming both financial institutions and victims of identity theft.
Il riciclaggio di denaro is another problem, with scammers transferring illicit funds through various accounts to hide the origin of the money and integrate it into the legitimate financial system. phishing scams, which trick users with seemingly legitimate emails or messages, are very common and aim to steal sensitive information such as passwords or account numbers.
Le investment scams are another sophisticated form of fraud, where criminals promise high returns on investments, often related to cryptocurrencies or new financial technologies, that are deceptive. Even the internal fraud can be a risk: employees of fintech companies exploit their privileged access to systems to commit fraud against the company or its customers.
Finally, a growing technique is the SIM swap fraud, where scammers take control of a victim's mobile number to intercept password recovery messages or authentication codes, facilitating access to bank accounts.
The Damage Caused by Fintech Scams
Fintech fraud can have profound effects on economic activities, negatively impacting in various ways. On the one hand, companies face direct financial losses due to fraudulent transactions and unauthorized withdrawals. On the other hand, they have to incur additional costs to improve safety systems and train staff, which increases overall operating costs.
Fraud also leads to problems of regulatory compliance, with companies having to manage controls and sanctions, further increasing expenses. In addition, companies may suffer damage to reputation, which undermine customer trust and require huge efforts to restore the company's image.
To mitigate these impacts, it is essential adopt effective strategies. Prevention requires the implementation of advanced fraud detection systems and adequate staff training. Detection is based on the analysis of suspicious behavior patterns and verification of transactions. Responding to fraud involves rapid recovery measures and clear communication with customers to reduce damage and restore trust.
Fintech Scams: The Case of George Workman
An emblematic example of these scams is that of George Workman, London entrepreneur and founder of Liberation Cocktails, who has suffered the loss of £10.800. The scammers, posing as Revolut fraud agents, they convinced him to follow a link which was supposed to put him in touch with the company's support. In reality, this allowed the criminals to access your funds, stealing them from the main bank account via Revolut within minutes. Despite numerous recovery attempts, the money disappeared without a trace.
Revolut's Position and the Accusation of Social Media
Revolut, the leading fintech in Europe, as we said before, is particularly affected by the increase in scams, especially from authorized push payments (APP) in the UK. Recently, the company has obtained a banking license in the UK and is preparing for international expansion. But these scams and the increase in complaints are threatening its ambitious growth plans. With over 45 million customers in 38 countries, the company is facing a image crisis, complicated by a recent $45 billion valuation following a secondary share sale. The fraud challenges could negatively impact both the reputation and financial health of Revolut, which recently began generating annual profits after years of explosive growth.
In recent months, Revolut has adopted a stricter stance on refund requests, which has led to an increase in complaints. APP fraud is difficult to track, as it often involves multiple banking institutions. To address the problem, Revolut said it was considering fight against fraud as a priority, implementing advanced security measures such as biometric authentication and automatic alerts for suspicious transactions. The company said it has reduced fraudulent transactions in the United Kingdom of over 20% in 2023. However, as the Workman case demonstrates, measures taken, such as biometric authentication and automated verification, they are not always enough, and many people continue to fall victim to fraud.
In response to these issues, Revolut then blamed social media, in particular Meta Platforms Inc., of not doing enough to fight financial scams. Fraud originating on social networks represents a significant part of the problem, with the 77% of online scams that happen through platforms like Facebook and Instagram. This has pushed Revolut to to urge the intervention of the European authorities to address the issue.
Woody Malouf, Revolut's global head of financial crime, explained that despite monitoring around half a billion transactions a month and using artificial intelligence to detect suspicious activity, fraudsters continue to adapt rapidly to new technologies. About the 60% of scams reported to Revolut comes from platforms like Facebook and WhatsApp, highlighting the need for closer collaboration between fintechs and big tech companies to address the phenomenon.
Revolut is not alone: other fintechs and digital banks, such as TSB Bank, are facing similar challenges, with even higher per-customer fraud rates.
“Serious Negligence” and Denied Refunds
The situation is complicated by the ambiguous definition of “gross negligence” by consumers, often used to rreject refund requests. The case of George Workman illustrates the difficulties in recovering funds after a scam. After unsuccessfully trying to resolve the issue with Revolut customer service, Workman filed a complaint with the Financial Ombudsman Service (FOS), but is still awaiting a decision. FOS data indicates that Revolut has rejected almost all refund requests, often citing the customer negligence as a reason.
New UK rules: Faster refunds from October
The situation has prompted the United Kingdom to introduce new legislation, effective from October 2024, which will force all banks and fintechs a Reimburse fraud victims within five daysThis reform divides the Responsibility for refunds among the institutions involved in the fraudulent transactions and requires Revolut to cover 50% of the refunds.
The change represents a major challenge for Revolut, which must address an increase in fraud while maintaining its growth and reputation. While the new regulation is an important step towards greater consumer protection, the process of getting refunds remains complicated.
