Key Points
- U.K. banks must compensate APP fraud victims up to £85,000 from October 7.
- Tensions rise as banks call for social media firms to share financial responsibility for fraud compensation.
- Meta advocates for collaboration with banks through its FIRE initiative, resisting calls to bear financial liability.
- The debate on social media firms’ responsibility for fraud compensation is ongoing.
Tensions between U.K. banks, payment firms, and social media companies are escalating over who should be responsible for compensating online fraud victims. Starting October 7, banks will be required to compensate victims of authorized push payment (APP) fraud, with a maximum payout of £85,000. APP fraud occurs when criminals trick or manipulate individuals into sending money, often by impersonating businesses or individuals.
Although the £85,000 compensation is lower than the previously proposed £415,000 by the U.K.’s Payment Systems Regulator (PSR), financial institutions remain concerned about the costs. After receiving backlash from the industry, the PSR reduced the compensation figure, with groups like the Payments Association arguing that the higher amount would be too burdensome for the financial services sector.
Now that banks are shouldering financial responsibility, questions about social media platform’s role in these scams are arising. London-based digital bank Revolut accused Meta (Facebook’s parent company) of not doing enough to combat fraud, arguing that tech platforms should help cover compensation costs. Woody Malouf, Revolut’s head of financial crime, said Meta and other social media companies “have no incentive” to take action if they aren’t held financially responsible for the fraud originating on their platforms.
Social media has become a hotbed for fraud, especially as digital payments and online shopping increase. While the Labour Party has previously proposed that tech firms should reimburse fraud victims, it remains unclear if the government will mandate this.
Industry experts like Riccardo Tordera, policy director at the Payments Association, have expressed frustration. Given the high level of fraud occurring on tech platforms, he calls tech platforms’ lack of responsibility “unacceptable.” He compares social media to the “wild west” for fraud and urges more regulation.
Tech companies like Meta argue that banks focus too much on transferring liability and should instead work collaboratively. Meta promotes its Fraud Intelligence Reciprocal Exchange (FIRE) initiative, a framework designed to allow banks and tech platforms to share information and prevent fraud through data exchange and improved detection systems.
While banks continue to push for greater regulatory responsibility on social media firms, the issue remains complex, and experts believe a resolution may take time.
