Innovate Finance, the industry body for UK fintech, is calling for increased industry collaboration to help halve fraud in the UK by 2028 in its new anti-fraud strategy.
Through ‘A Technology Strategy to Smash Fraud’, Innovate Finance sets out a clear plan to crack down on payment fraud in the UK, which currently costs the region at least £1.2billion annually.
The impact of fraud risks not only consumer confidence in digital finance, but also disproportionately affects those on lower incomes, with 70 per cent of victims suffering wider negative impacts, including mental and physical health and debt.
In the anti-fraud strategy, Innovate Finance advocates for a data-sharing approach across sectors, regulators and the law enforcement industry, to industrialise the UK’s use of technology to spot and stop fraud and enable all financial firms to access and use these solutions. While a range of data-sharing initiatives exist across the UK, the new strategy aims to build on these and significantly scale up their impact.
The fintech industry body also recommends introducing shared liability for social media and telecommunications platforms for fraud originating on their platforms and networks. With the majority of fraud originating on social media platforms, it is clear a change in strategy is required if a crackdown on fraud is going to be successful.
Finally, Innovate Finance has urged for the creation of a ‘world-beating’ UK anti-fraud tech industry, which would create jobs and growth, as well as export key anti-fraud solutions.
Leveraging data sharing to tackle UK fraud
Janine Hirt, CEO at Innovate Finance
“Fraud accounts for over 40 per cent of crime but receives less than one per cent of police resources,” explained Janine Hirt, CEO at Innovate Finance. “Given the scale of the threat posed to consumers and businesses alike, we urgently need a more collaborative, targeted, and effective strategy that aspires to smash fraud in the UK.
“This plan sets out how we can harness technology via data sharing to strengthen collaboration between industry and law enforcement. Current data sharing initiatives, while effective, operate in silos, which can make it difficult in practice. Critically, there is nothing in place with the critical mass or scale required to crush organised fraud. There is widespread agreement that establishing a National Anti Fraud Centre would be the appropriate vehicle to deliver this.
“We also need to update our laws, including the Online Safety Act 2023, to make tackling crime a shared responsibility between payment providers and the social media and telecommunications firms that allow fraud to take place on their platforms. By acting now, the UK Government can lead the way in tackling fraud, protecting consumers and reinforcing its position as a global leader in secure and innovative finance.”
A national anti-fraud centre
A new National Anti Fraud Centre would be able to scale-up, connect and industrialise the range of initiatives in the fraud data sharing space and ensure that these are easily accessible by firms of all sizes.
Current initiatives with national crime agencies and industry focus on a few large firms; the strategy outlines how effective fraud prevention requires inclusive, accessible solutions for all stakeholders.
“The pain and distress caused by fraud are immeasurable, and it cannot continue,” added Luke Charters, MP for York Outer. “Effectively countering this threat requires a coordinated, cross-sector response, leveraging expertise from financial institutions, regulatory bodies, law enforcement, and policymakers alike. To effectively combat fraud at scale, I believe we should establish a national anti-fraud centre. By uniting insights, intelligence, and expertise from across industries, this centre could serve as a formidable force against fraudsters, enabling real-time threat detection and disruption.”
By ensuring central leadership across the variety of data-sharing initiatives, Innovate Finance says it would be easier to tackle fraud at the source and prevent scams from occurring. Furthermore, effective data sharing, collection, and analysis between finance firms, regulators, law enforcement, technology platforms and telecoms networks – to ensure collective efforts are focused on preventing fraud and ending the asymmetry of data access.
Ultimately, the new anti-fraud centre would lead a coordinated response to fraud – delivering on the Government’s vision to ensure a coordinated effort across sectors, law enforcement and government.
Introducing shared liability
The strategy also calls for the introduction of new shared liability rules to ensure big tech social media and telecommunications firms do more to tackle fraud conducted on their platforms.
Currently, 77 per cent of Authorised Push Payment (APP) fraud originates online. Digital social platforms are the single largest source of fraud origination, with data from a fintech firm showing that fraud originating from Meta constitutes 60.5 per cent of all reports received.
However, it is payment service providers (PSPs) which are currently held solely responsible for reimbursing victims of fraud, leaving a significant responsibility gap and a lack of incentive for social media and telecommunications platforms.
To deliver on the shared liability proposal – and ultimately reduce purchase scams in payments and other sources – the report calls on the Government to amend the Online Safety Act 2023 to:
Introduce a reporting framework – to ensure reported fraud is handled with impartiality, and enables cross-industry data sharing and analysis.
Set up a fraud origination redress fund – for telecommunications firms and social media platforms to pay into.
Create a distribution mechanism – to issue reimbursements from responsible parties.
Establish a dispute resolution process – to resolve disputes between social media platforms and telecommunications firms, ensuring the acceptance of shared responsibility does not reach a stalemate.
Benefits for the UK economy
The strategy aims to not only reinforce the UK’s international competitiveness as a safe place to invest, but also frames the focus for the UK to develop and export new anti-fraud regulatory technology (regtech) solutions. Projections suggest the regtech sector will reach $246.16billion by 2032 a significant opportunity for the UK to build a world-beating anti-fraud technology sector and reaffirm UK fintech as a global economic champion.
As a sector primed for growth, Innovate Finance has emphasised its opportunity as a key driver of economic growth for the UK as well as a lever to help eliminate the significant cost of fraud to consumers and businesses.
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