The rising threat of scams: as new regulation comes into force, can banks afford not to protect consumers?

Tom Gaffney

Tom Gaffney, cybersecurity expert at F-Secure, shares thoughts on what financial organisations can do as UK banks must refund fraud victims up to £85,000 under new rules.

This month, in a world first, bank refunds for fraud became mandatory after the Payment Systems Regulator (PSR) reduced the maximum compensation from a previous proposal of £415,000. As the watchdog introduced a new cap of £85,000, it’s reported that this would cover more than99% of claims.

The requirement aims to incentivise all payment firms to prevent scams from happening in the first place, and make sure consumers are protected if they do fall victim, which is becoming increasingly more difficult to avoid.

In today’s world, scams are more sophisticated and pervasive, leaving all consumers more vulnerable than ever before. Cyber criminals are continuously evolving their tactics, exploiting technological advancements, and taking advantage of unsuspecting individuals.

For banks and payment firms, this presents both a challenge and an opportunity. By proactively supporting their customers in becoming more scam aware and implementing robust security measures, financial institutions can not only protect their customers but also build trust and gain a competitive advantage in the marketplace.

Can banks afford not to protect their customers?

The scam landscape

The current landscape of scams is more complex and multifaceted than ever. With the rise of online banking, mobile payment apps, AI and digital wallets, scammers have adapted their methods to target consumers where they are most active—online. Phishing attacks, which trick users into providing sensitive information by impersonating legitimate entities, remain a prevalent threat. However, new forms of scams such as “smishing” (SMS phishing) and “vishing” (voice phishing) have emerged, adding additional layers of complexity to the threat landscape.

Social engineering tactics have also become increasingly sophisticated. Scammers now utilise personal data gleaned from social media, data breaches, and even public records to craft highly targeted attacks. These scams are often difficult to detect because they appear authentically personalised and trustworthy, catching even the most cautious consumers off-guard. Most recently highly acclaimed newsreader, Moira Stewart.

The proliferation of artificial intelligence (AI) has paved the way for ground-breaking innovations in cyber crime too. One such sinister trend on the rise is voice cloning scams, where AI-generated synthetic voices are used to deceive and defraud unsuspecting individuals.

Consumers are vulnerable – but why?

Several factors contribute to the increased vulnerability of modern consumers to scams. First, the convenience of digital payments and online transactions has led to a mindset where speed often trumps caution. Consumers expect seamless, instant transactions, which can sometimes result in them bypassing important security steps.

Second, the sheer volume of information that consumers share online, often unknowingly, provides scammers with a wealth of data to exploit. Public social media profiles, for example, can reveal personal information that scammers can use to build credibility in their phishing attacks.

Finally, while technological advancements have made transactions easier, they have also created new entry points for cyber criminals. The interconnected nature of the digital economy means that a security breach in one part of the system can quickly spread across platforms, amplifying the risk.

How can banks can support their customers

Banks and payment firms are uniquely positioned to help consumers protect themselves from scams and with the new regulation coming into force, it is in the interest of their bottom line to do so.

One of the most effective ways to do this is through education and awareness campaigns. By providing customers with clear, up-to-date information about the latest scam tactics, financial institutions can arm them with the knowledge they need to recognise and avoid potential threats.

Banks and payment providers could benefit from greater collaboration with cyber security firms. By sharing data on emerging threats and working together to disrupt scam networks, financial institutions can help reduce the overall incidence of fraud across the industry.

Banking firms need to have access to know-how and up to the minute information, which can be passed onto their customers. This would include being informed of the latest scams such as the “hi mum” message scam which tricks the victim into thinking they’ve been contacted by a child and convinced to send money to a third party.

Many banks already send out alerts and notifications about suspicious activity, but these communications could be made more impactful by focusing on prevention rather than cure.

Another key area where banks can support customers is by offering scam protection as a value-add to their existing customer offering. Investing in customer protection and scam prevention isn’t just about mitigating risk—it’s also a strategic move that can enhance customer trust and loyalty. Consumers are more likely to stay with a bank or payment provider they believe is actively working to keep their money and personal information safe. By prioritising security, banks can differentiate themselves in a crowded market and attract new customers who value safety and peace of mind. Over time, this trust can translate into a stronger, more loyal customer base.