UK fintechs sound alarm on spike in organised crime
Seven in ten UK fintechs said fraud volumes in their business shot up over the last year, according to new research.
Alloy’s State of UK Fraud Report stated 79 per cent of UK fintech firms lost at least £500,000 to fraud in the 12 months to October 2024.
Two in five recorded losses between £1m and £5m in that time, and nearly nine per cent said they lost over £5m.
The report, which surveyed 118 director-level fintech bosses, showed nearly three-quarters blamed organised crime rings for the majority of fraud within their business.
James Baston-Pitt, Alloy’s Head of Growth UK, told Morning Wire: “Fraudsters are looking to exploit gaps in the system, they will work nine to five and will move around.”
He added: “The methods of [money moving] have changed.
“Rather than being in branch and impersonating they are working with fintechs in a none face-to-face world”
Baston-Pitt said emerging AI technology was acting as a double-edged sword in the surge of fraud.
“It can help drive better efficiency and detect fraud… the threat is that AI is reducing the barrier of effort for fraudsters,” he added.
“Fraudsters are like sharks going up and down a shark net looking for gaps within that net to be able to exploit, vulnerabilities in regulation or how businesses operate and AI is ultimately reducing the barrier or effort.”
Financial penalties and reputation damage are firm’s top fears
43 per cent of the firms in Alloy’s report said their current fraud prevention controls were insufficient.
Almost three in five blamed insufficient staffing, tools and access to data as the top reasons they were unprepared to combat fraud.
Baston-Pitt said firms must be aware of the “constantly evolving” nature of fraud and it was their “responsibility to keep the trust in order to keep money moving.”
He stressed fraudsters and the associated risks can cause up to a decade worth of damage and firms must work to curb excessive harm.
93 per cent of fintech c-suite leaders surveyed said regulatory penalties and reputation damage were the most concerning consequences of fraud.
This ranked ahead of direct financial losses and the loss of clients at 87 per cent.
The Payment System Regulator (PSR) introduced mandatory reimbursement requirements for victims of Authorised Push Payment (APP) scams in late 2024.
This dictated the sending and receiving organisations would each shoulder 50 per cent of the cost of reimbursement.
57 per cent of firms said regulatory rules were driving an increased investment in both fraud prevention and new technologies.
This follows Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves last week abolishing the PSR as part of the Government’s mission to ‘cut the red tape’ to boost economic growth.
The legislator is set to be folded into the Financial Conduct Authority (FCA) as a consolidated regulatory body.