Banks are cracking down on scams, but should they go further?
Australian banks have vowed to toughen their response to the growing threat posed by scammers and increase protections for consumers with the launch of a new Scam-Safe Accord.
The accord, which was announced last Friday and brings together 76 commercial and customer-owned banking institutions, details a commitment to roll out a number of anti-scam measures, including a new payee confirmation system aimed at improving transparency for customers making transfers.
So far in 2023 Australians have lost a combined $430 million to scammers according to the Australian Competition and Consumer Commission's (ACCC) Scamwatch hub, the vast majority of which has come from investment scam losses ($260 million).
"Falling victim to a scam can have devastating and life-changing consequences," says Peter King, chief executive of Westpac and chair of the Australian Banking Association.
"We are sending a clear message to these criminals that they have no business being in Australia and we are doing more to stop them from ripping off our customers.
"This will be one of the biggest technical uplifts for Australian banking in recent times and means Australians with bank accounts will be significantly more protected from scams."
How will day-to-day banking change?
Six major initiatives focusing on detecting, disrupting and responding to scams are outlined in the accord, four of which will have a direct impact on the way Australians conduct their banking:
- Name matching: The most significant of the initiatives is the new payee confirmation system which is set to be rolled out across the industry during 2024 and 2025. In an effort to combat fraudulent transfer requests, the system is expected to alert users if the recipient name they've entered doesn't match the details of the account they're transferring money to.
- Biometrics: Many Australians will already be familiar with using biometric security measures such as a fingerprint or face scan to log in to their banking apps. But major banks have pledged to use at least one biometric check to verify the identity of new customers opening an account online by the end of 2024 - a measure they say will help address identity fraud.
- Transfer warnings: One common tactic used by scammers is to pressure victims to act quickly. So to give people a greater opportunity to scrutinise transfers before they're made, banks will introduce more delays, questions and warnings when transfers are made to a new payee or when a transfer limit is increased.
- High-risk transfer limits: Customers and scammers have also been put on notice that greater limitations will be placed on transfers made to what banks call high-risk channels (e.g. some cryptocurrency platforms) as a way of cracking downing down on theft and making it harder for scammers to move stolen money out of the country.
Beyond these strategies, accord members have also promised to increase their intelligence sharing and implement their own anti-scam strategies on a bank-by-bank basis.
Should scam victims be reimbursed by banks?
While the announcement of a coordinated anti-scam strategy has been met with positive reception from many quarters, there are calls for more to be done in the space.
"The critical next step must be for the Government to introduce mandatory reimbursement of customers' money still lost to scams," says Stephanie Tonkin, chief executive of the Consumer Action Law Centre.
"There needs to be a clear, high standard of care that banks are required to meet at law, and if they fail to do so, the bank should foot the bill."
Many point to the United Kingdom as an example on this front where, earlier in the year, legislation was passed to require banks to reimburse victims of Authorised Push Payment scams.
The move is designed to incentivise banks to up their game at a time when a large number of people are falling victim to scams (£500 million was lost to APP scams in 2022 alone), many of whom come from more vulnerable groups.
Who is most vulnerable to scams?
Dr Muhammad Al Mamun, a senior lecturer in finance at La Trobe University, says that like the UK, a significant number of scam victims back home are also from more vulnerable groups such as recent migrants and older Australians.
Given this, he sees an argument for Australian banks to take on more responsibility for scams that have, in some cases, been made easier to perpetrate because of advances in banking technology.
"As part of my research I talk to older Australians, many of whom still prefer the older, cash-based banking system," he says.
"There are quite a large number of customers who are less knowledgeable about the internet and technology who feel like they are being pushed into this space though. So I think there is something to argue about in terms of responsibility.
"The UK system is trying to make sure that responsibility is shared. Of the two parties - the customers and banks - the banks have better resources and they're the ones who are rolling out this technology all the time. So if you're rolling out the technology, you also have a responsibility to safeguard those technologies."
For further information on identifying and avoiding scams, plus the latest Australian scam statistics, visit the ACCC's Scamwatch website. Or have a read through our own guide on how to protect yourself from scams.
Get stories like this in our newsletters.