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TSB is failing at fraud and here's why...

When a bank promises to refund all victims of fraud, is it ok for them not to bother with adequate fraud defences?

Blog written by Jason Costain 14 May 2024

Since April 2019, challenger bank TSB has (mostly) kept its promise to refund customers if they suffer from fraud. However, when it comes to fraud defence it seems all is not well at the bank.

Figures released by the Payments Systems Regulator (PSR) in October 2023 show that TSB is allowing proportionately more of its customers to send money to Authorised Push Payment (APP) scammers than any other UK Bank:

This is a worrying position to be in for a bank that promises to look after fraud victims.

The PSR publishes APP Fraud data to allow consumers "to see the full extent of how well your bank has performed in tackling APP fraud... in the last year, compared to other UK banks and payment firms".

It's important to note that the APP fraud losses above aren't absolute values. Instead, the PSR is attempting to compare different sized banks against each other (hence the use of the amount of APP Fraud per £million of payments sent). For TSB to sit at the top of this table should be a very worrying place for them be and it suggests an under investment in fraud defence. Given TSB's stance on fraud, this is disappointing.

It is even more disappointing because TSB has seemingly failed to learn from the costly fraud attacks that accompanied its botched IT spin off from Lloyds Bank in mid-2018. At that time, TSB reportedly experienced 70 times the normal level of fraud attacks as scammers exploited TSB's much reported "IT meltdown" which had caused 90% of calls to TSB to go unanswered and nearly 100,000 customers to complain.

It has long been rumoured that TSB's much-trumpeted fraud refund guarantee was simply a media play to rescue their tarnished reputation. Quite simply, the bank had nothing to lose by announcing to refund all scam victims - this is pretty much what they'd been doing hand-over-fist for 10 months since their IT meltdown.

Furthermore, Fraud Team insiders who worked at the TSB at the time claim they were caught out by the announcement, which just adds to the sense of chaos.

It is sad to see that beyond refunding some (not all) scam victims, TSB has apparently failed to tackle APP fraud. This means that TSB is allowing its customers to send proportionately more money to scammers than any other UK bank.

Whilst TSB claims to refund all innocent scam victims, the percentage it refunds has actually been steadily falling since the guarantee was announced, and it now stands at 91% by value, 94% by volume. Don't be fooled into thinking that because TSB refunds most of its scam victims it is getting the money back from criminals, far from it; TSB is allowing proportionately more money to flow into the pockets of organised criminals than any other UK bank. This is unacceptable.

Fraud defence is not simply just about refunding customers when they suffer from fraud, it's about preventing and protecting customers from the trauma of fraud in the first place, and in doing so disrupting the scammers business model. This is what UK society dearly needs more of, and it is what TSB is failing at.

In a press release it issued on 16 April 2024, TSB called on "social media and phone companies to step up in protecting consumers from fraud". Given TSB's abysmal fraud prevention performance seen above, it's about time they stepped up too.

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