APP Fraud definition and examples

Note: This article explains what Authorised Push Payment (APP) fraud is, how it happens, and the types of scams to be aware of, whether you're an individual or a business using embedded financial services.

Authorised Push Payment Fraud is where someone is deceived into authorising a payment either: (i) to an account that they think belongs to a legitimate payee but is actually controlled by a fraudster, or (ii) for something they believed was legitimate but is actually fraudulent. In other words in an APP Fraud case, the original payment was intentionally and technically authorised by the correct account holder. However, the payee or the outcome of the payment are claimed to be some kind of fraud or scam.

What are examples of APP scams?

Here are just a few of the types of frauds and scams which can involve

• Manipulated victims e.g. “Lost pet scams”

• “Romance scams”

• Fraudsters posing as legitimate / well-known business

• “Impersonation scams” posing as police… as bank…

• Business failure / deceit

• Payee’s failure to deliver / very poor customer service / neglect of consumer rights

• “Purchase scams” e.g. no actual goods or services were ever going to be delivered, a fake business

• Fake charities

• “Investment scams”, pyramid schemes, etc

• “Loan fee scams”

• Advance fees to claim prizes

• Advance fees for fake jobs, certification, or visa applications

Additionally, some types of scam target businesses, with Micro-enterprises having the APPF claim rights the same as consumers:

• CEO / CFO impersonation and fakes

• Invoice redirection

• Fake suppliers

• Employee embezzlement

Any of these frauds can be perpetrated via phone, email, apps, portals, and even in person such as scammers impersonating couriers or police officers at people’s front doors. The ways the money is handed over include every possible method, but wire transfer / push payment methods are getting more popular as more people are familiar with making payments via online and mobile banking.

And this is not an exhaustive list: criminals are dreaming up new ways to scam people and businesses out of their money every day. As businesses operating and supporting payment services, it’s our duty to help fight such crime, avoid facilitating the movement of the proceeds of crime, and protect the rights and financial outcomes of end customers.

How big of a problem is APP Fraud?

APP Fraud is a huge and escalating problem worldwide, with shockingly high crime and loss figures presented annually in the UK.

At the end of May 2024, UK Finance released their Annual Fraud Report 2024 which revealed the following statistics:

• Fraud accounted for more than £1.2 billion in losses in 2023, up 12% year-on-year

• (Banks prevented a further £1.25 billion of unauthorised fraud)

• Fraud represents 40% of all reported crime in the UK

• Mobile apps are the platform of choice for fraudsters

• Overall, APP fraud losses declined, but fraud as a category continued to increase

On a wider economic basis, fraud costs the UK £137bn a year (Crowe, 2021) - number which is probably far higher now since between 2021 and 2023 fraud has grown from an estimated 15% of all reported crime to 40%.

The rise in fraud is being accelerated by the mainstream adoption of digital payments, particularly via mobile devices: 75% of all reported fraud across the EMEA region originated from a mobile device (source: Biocatch).

27% of decision-makers at UK payment companies believe APP scams impact companies and customers more than any other type of fraud. Awareness and prioritisation of fraud-fighting is sure to increase with new regulations, PSP implementation of APPF mitigations, and wider public discussion.