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Discussion: The true scale of the APP scam challenge facing banks

As ACI publishes original research about the state of APP scams in India, the U.K. and the U.S., Cleber Martins, Head of Fraud Management for Banking, joins Elise Thrale to discuss the report’s key findings and the potential changes coming in the future in response to the problem.

Elise Thrale: Tell us about ACI’s new report about APP scams, Scamscope, and some of its key findings.

Cleber Martins: We’ve teamed up with leading global analysts GlobalData to examine APP scam trends in three markets around the world: the U.K., the U.S. and India.

One of the key findings, that APP scams are a huge and growing problem, will not come as news to anyone in the industry. What will come as a surprise, however, is the extent of the forecasted growth. In our three focus markets, losses from this type of fraud are expected to record an average compound annual growth rate of 21%. By 2026, we will see the value of annual losses due to APP scams double in each of those markets, running to $0.6B in India, $1.6B in the U.K. and $3B in the U.S.

ET: Why should this be a concern in the context of the current direction of payments?

CM: Aside from the direct cost of fraud losses, which is a major concern — especially to the victims — a general lack of consistency around reimbursing consumers for APP scam losses could lead to slower or reverse adoption of digital payments.

That cannot be allowed to happen. Forecasts from our Prime-Time for Real-Time annual report predict that by 2026, real-time payments are set to be at the heart of the new global payments landscape, accounting for a quarter of all electronic payments globally (up from 18% in 2022). The same report found that in 2021, real-time payments facilitated $78.4B of formal GDP across 30 selected markets, and that number is forecasted to reach $173B in 2026.

Maintaining confidence in digital payments is vital to realizing this huge potential, which will be accompanied by significant societal benefits, including increased financial inclusion, economic growth and prosperity.

Real-time payments are the safest payment method as they provide more opportunity to leverage advanced fraud controls — but criminals will take advantage if we don’t have those controls in place.

ET: The industry has been wrestling with APP scams for some time now, but do you sense things are coming to a head?

CM: In mature and developing markets alike, the industry has not yet found a satisfactory formula for better educating customers over the risks and defining liability in a way that is fair to all parties. Meanwhile, the criminals, who have always thrived on uncertainty, continue to perfect the art of tricking people into sharing private information or sending them money.

It seems certain that regulators are going to step in. Consumers are being cleaned out, and it is their interests that ultimately drive regulation. The report’s focus markets are interesting in this regard. In the U.K., regulators are already moving. The payment systems regulator (PSR) has said that it intends to put in place mandatory reimbursement “in all but exceptional circumstances” for all victims of APP scams.1 The PSR is also proposing that liability be split between initiating and receiving banks. In India, they are stepping up demands on banks to address the problem through technology.

With regulators in developed and developing real-time payment markets around the world looking on, these interventions may have consequences beyond the U.K. and India. Our aim with the report is to bring together the best available data on the current and future situation.

Combined with expert market commentary from inside ACI, we hope to provide a clearer sense of how the industry can better work together to drive down APP scams, and how it can work with other industries, too.

ET: Can you tell us more about the theme of collaboration, which is a key aspect of the report’s recommendations?

CM: While it is true that real-time payment channels have made it simpler for fraudsters to make a handsome living, it is mobile networks, messaging apps and social media networks that make it easier for them to contact and manipulate victims. And it is mule accounts that allow them to keep getting away with it.

This shows APP scams to be an ecosystem-level challenge, so they require an ecosystem-level approach. That means sharing solutions, techniques and intelligence between banks and vendors, and between merchants, issuers and acquirers — and even with social media companies and telcos.

As such, a change in mindset is needed, and the report advocates for this. Successfully fighting back on scams is not about focusing on the channel, product or method used by scammers. It doesn’t matter whether a scam is a romance, crypto, PIX fraud or Zelle scam. It’s simply about ensuring that customers are better educated and protected when it comes to social media and messaging apps and the risks they face there, and that stolen money has nowhere safe to go in the shape of unmonitored mule accounts.

In the full report, we look at the solutions to making this possible, from sentiment analysis and behavioral biometrics, to the concept of creating a “fraud DNA” framework that enables sending and receiving banks to better collaborate and reduce overall risk.

Get your copy of Scamscope: APP scam trends in the U.S., U.K. and India from ACI Worldwide to learn more about the present and future of APP scams and how the industry can better battle back against the scammers.


Head of Payments Intelligence & Risk Solutions

Cleber Martins joined ACI Worldwide in 2001 and has 20 years of experience in implementing industry-leading enterprise fraud prevention solutions and anti-money laundering strategies. Cleber’s enthusiasm for driving innovation in fraud prevention stems from the pride he takes in protecting both his banking customers, and the people and communities they serve. Throughout his career Cleber has been at the forefront of the evolution of machine learning: from a focus on inputting human experience into machines, to its modern form that empowers fraud experts to combine their real intelligence with AI. Cleber calls this trend toward business users wielding new models, the democratization of machine learning. Cleber’s key areas of expertise include helping payments leaders to develop multi-faceted fraud prevention strategies that combat modern threats, as well as creating actionable intelligence in payments data, and the evolution of fraud prevention into a Customer Experience differentiator for organizations.