PS23/4 Countdown: Banking’s 5-Point Checklist for Smooth Sailing

In a decisive move to fortify the financial sector against the ever-evolving threat of authorised push payment (APP) scams, the recent policy statement PS23/4, issued in December 2023 by the PSR, forces banks to revamp their strategies. With a looming deadline of October 2024 for implementation, it’s imperative that banks swiftly adapt and evolve their approaches to counter these sophisticated scams effectively. 

Here’s an in-depth look at the top five key themes that can be taken from the policy, each demanding immediate attention and action:

1. Shift From Fraud Detection to Fraud Prevention: This pivot is fundamental. Banks are urged to focus on proactive measures for protecting consumers from APP scams, transcending beyond mere compliance. By leveraging advanced analytics, AI, and machine learning and using all available data, banks can look to identify potential scams before they occur. It’s crucial to move beyond just transactional data. Supplementing this by understanding consumer behaviour patterns, demographic and relationship information, and unusual logins and password resets can help to anticipate and mitigate risks.
   
2. Collaborative Efforts for Implementation: The fight against APP scams cannot be solitary. I can’t overstress the importance of a unified approach in combating APP scams. Collaboration between banks, regulatory bodies, and payment systems is essential. This involves sharing information and insights on emerging fraud trends, jointly developing fraud detection and prevention standards, and creating channels for rapid communication and response to threats. By working together, these entities can create a more robust, cohesive defence against financial crimes, ensuring a safer consumer environment and maintaining the financial system’s integrity.
3. Adherence to New Compliance Guidelines: The policy sets clear guidelines for Pay.UK and Payment Service Providers (PSPs). It is critical to adhere to the new compliance guidelines. Banks must integrate these guidelines into their operational frameworks to ensure they are compliant and effectively protecting their customers. This involves regularly updating their systems and practices to align with evolving standards, training staff on these changes, and conducting regular audits to ensure ongoing compliance. It’s about creating a compliance culture permeating every aspect of banking operations.
4. Innovative Fraud Detection Techniques: Criminals continuously innovate; financial institutions must do the same with their fraud detection techniques. The dynamic nature of financial scams necessitates a move beyond traditional methods by asking different questions of traditional data points. Banks should also explore emerging technologies like behavioural biometrics and deep learning, which can provide a more nuanced and contextual understanding of customer behaviour. Integrating these advanced technologies into existing systems and flipping the questions we ask on traditional data points allows for a more layered and sophisticated defence mechanism capable of detecting subtle anomalies indicative of fraud. This proactive approach and real-time analysis significantly strengthen the bank’s ability to protect its customers from sophisticated and evolving scams.
5. Continuous Monitoring and Improvement: The fight against APP scams is ongoing. The importance of a dynamic and responsive approach to fraud prevention can’t be overstated. Financial institutions should establish specialised processes focused on monitoring emerging scam tactics and adapting fraud prevention strategies accordingly. These processes should employ a combination of data analytics, customer feedback, and industry reports to stay ahead of the curve. Banks should also engage in regular education programs for their staff and customers, fostering a proactive culture of awareness and vigilance in the face of evolving financial threats.

The PS23/4 policy statement is pivotal in strengthening the banking sector’s defences against APP scams. By focusing on these critical areas, banks can significantly enhance their capabilities to protect their customers and maintain the integrity of the payment system.