TechnoXander 152 Empowering Mid-Tier Banks

The Financial Conduct Authority (FCA) released a report recently titled, “Anti-fraud controls and complaint handling in firms,” with particular attention paid to Authorised Push Payment (APP) fraud. This study included current account providers, challenger banks and payment firms among its participants.    

While the FCA identified effective control frameworks and best practices, it also identified various weaknesses in fraud risk management and customer treatment areas. We will focus on two of these critical areas identified by the FCA-fraud systems and controls and customer awareness campaigns–and provide solutions that would allow mid-tier banks to address these concerns effectively.

Fraud Systems and Controls

One of the key findings from the FCA review relates to the need for improved anti-fraud control frameworks and strategies. Mid-tier banks already utilise transaction monitoring systems; however, due to an increasing threat from Advanced Payer Identity fraudsters, they should also implement Confirmation of Payee solutions as one solution against such fraudsters.    

These solutions play a critical role in safeguarding payment journeys by verifying recipient details and using behavioural biometrics to detect signs of social engineering in real-time, which has proven very successful at combating fraud prevention and detection efforts. Implementing such technologies can significantly bolster fraud prevention and detection efforts.    

Customer Awareness Campaigns

Customer awareness campaigns are an effective way to protect customers against scams. Mid-tier banks should create customised awareness materials tailored specifically for specific customer personas to maximise the effectiveness of such efforts and make an impactful statement about the potential danger scammers pose.

Personalised messaging ensures that it resonates with each customer segment, increasing the chance of the patterns of scams being recognised and preventing them. The establishment of a dedicated phone line for customers to report suspicious activities can foster customer trust and security. 

Effective Customer Complaints Management

Improving the way mid-tier banks address their customer complaints in situations of fraud investigations is a prerogative. This may include evaluating language used during communication, timing of notifications, and consistency in decision-making rationales.

To achieve this, a team must have adequately trained individuals with appropriate expertise to handle complaints efficiently. Adequate staffing and operational efficiency can only be attained with effective Management Information Systems (MI).

Governance, Oversight, and Management Information (MI)

Enhancing data collection related to fraud is a vital step for mid-tier banks. This includes identifying the types of fraud and sub-categories specific to APP fraud. The MI system should not only focus on regulatory requirements but also incorporate customer-centric measures.

Mid-tier banks can leverage customer-specific data to enhance their anti-fraud systems and controls for enhanced prevention and mitigation of fraud. By taking this proactive approach mid-tier banks have more to gain from fraud management solutions.

What’s Next?

This blog serves as a call to action for both mid-tier and small banks to proactively seek professional assistance on any concerns regarding the implementation of the Payment System Reform Regulations in 2024. If your bank is preparing to expand Confirmation of Payee (CoP), a continuous review of antifraud systems and controls is necessary for meeting the PSR’s reimbursement requirements is important.

What Would Lead to Success?

Viewing anti-fraud controls and systems as mere compliance exercises is not sufficient, particularly for mid-tier banks. Instead, starting early and taking an active leadership role to establish robust anti-fraud systems and controls is the best way to safeguard customers and the institution in an ever-evolving threat landscape. Success here requires ongoing improvement and vigilance rather than simply ticking regulatory boxes.    

TechnoXander’s Confirmation of Payee Solutions is dedicated to creating cutting-edge technology that enhances anti-fraud systems and controls. As financial fraud continues to evolve, so must our responses. In collaboration with regulators and financial institutions, we are working together towards shaping a safer financial landscape for everyone, protecting against its rising tide of threats. 

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