Hey folks, I’m Rich and I look after Fraud & Disputes Risk at Monzo. I wanted to give you a bit of an update as the Payment Systems Regulator (or PSR) has just published fraud data for 2023.
I’m here to share some context behind the latest figures, update you on the work we’re doing in this space and answer any questions.
We’re committed to preventing APP fraud and we’ve been making steady progress
APP Fraud is an issue across the industry and last year victims in the UK lost over £1.17bn according to UK Finance. At Monzo, our priority is clear: to prevent fraud happening in the first place – to stop criminals from profiting and protect our customers from the financial and emotional distress that comes with falling victim.
As we explained last year, this is something we’ve really been investing in, and we’re starting to see that investment pay off. Last year we stopped £4.7 million getting into the hands of fraudsters. And this year we’ve already prevented 55% more fraud than in 2023.
Our approach relies on a combination of human experts and technology to help us proactively protect customers (with preventative security features), identify potential fraud (with machine learning models), and step in to try and stop it (with effective blocks, warnings and other interventions).
The PSR’s latest data shows we’ve reduced both the volume and value of money our customers lose to fraud and reflects some of the early progress we made last year.
In 2023 we invested in preventing impersonation and investment scams
Last year we focussed on reducing the most harmful types of scams – ones that are complex and sophisticated, and can result in customers losing large amounts of money, like impersonation and investment scams.
We’ve done this through a combination of cutting-edge technology to detect risks, and highly-trained fraud investigators to “break the spell” of scams in real-time.
The PSR’s data for 2023 shows we reduced the value of fraud our customers reported by 24% thanks to this focus on higher value scams. If we look at impersonation scams specifically, we reduced the value of fraud our customers reported by 48% last year.
We’re making headway to prevent more purchase scams
While we’ve made significant progress to prevent the most harmful scam types and reduce the overall value our customers are losing to fraud, we know we still see a higher volume of our customers falling victim to fraud.
As we shared last year, this is because we already tend to see a higher proportion of purchase scams as our younger customer base shop online more. To bring that to life, across the industry last year purchase scams increased by 35% in volume last year. But at Monzo we’ve seen them increase by 41%.
76% of APP Fraud (mainly purchase scams) originates online, typically via social media, where there’s currently no incentive for them to reduce fraud, or accountability for reimbursing victims.
Preventing purchase scams is a big focus for us this year, and Chris Wood recently gave a detailed update on our work in this space as we iterate to find genuinely effective ways to intervene when we detect potential purchase scams, without relying on bluntly-applied warning screens we know people are desensitised to.
We’re getting ready to comply with new regulatory requirements around reimbursement
While we’ll always be focused on prevention, reimbursing innocent victims of APP fraud is important to reduce the harm caused by fraudsters.
You’ll see our reimbursement rates are still among the lowest, and as with last year, this is because we’re less likely to reimburse for purchase scams as they’re relatively unsophisticated, lower in value and often not clean-cut cases for reimbursement.
We’re of course working to be ready to comply with the incoming regulatory requirements from the PSR which will land in October this year.
We’re preventing fraud happening through Monzo and returning money to victims
The PSR data for ‘Metric C’ is about money muling, where criminals recruit people to receive fraudulent money into their bank accounts. ‘Mules’ typically keep a small cut of the money for themselves, before they quickly transfer the rest onto someone else’s account. This happens multiple times through a network of different bank accounts. So by the time the money reaches the criminal’s account, it’s really difficult to trace back to them.
We continue to prevent money muling effectively, and this is reflected in the results which show we’ve reduced both the value and volume of fraud we’re receiving even further.
What’s especially effective about our approach is that we work in real time. Our machine learning models leverage a huge number of different signals related to money muling along with intelligence gathered by our skilled team of investigators. We monitor transactions in real time which means we can spot fraudulent payments immediately and our fraud investigators work 24/7 so they can review potentially risky payments straight away. This means we can intercept them before money mules have a chance to send the money on.
We’re developing innovative security features to protect customers
You’ll have hopefully seen we’ve been working to build industry-first security tools to keep our customers’ money safe, approaching this challenge with the same product and design thinking we use elsewhere at Monzo.
Through our Call Status tool we’ve seen more than 4,000 reports of potential fraud this year. We’re going to make it more discoverable in the right way by using it as part of “in the moment” interventions: when we detect an impersonation scam may be happening in real-time, can we surface the tool so you can check if you’re speaking to Monzo or not? We’ll be back soon to share an update with you as we prepare to roll this out.
This week we started rolling out three new security controls which each add an extra layer of security when you’re making larger bank transfers or withdrawing from your savings. We designed them to combat phone theft, shoulder-surfing and impersonation scams.
Fraud and security aren’t the easiest topics to speak about externally or to share our work in a transparent way – as we naturally don’t want criminals to use this information to their advantage.
But as we continue investing in these areas, we’re committed to keeping you in the loop with our progress and I’m sure we’ll be back to pick your brains. I especially want to thank you all for helping us shape our interventions and customer-protections with your feedback, suggestions and challenge on here.
Let me know if you have questions and I’ll answer as far as I can - Thank you, Rich
