The friction banks apply to instant bank transfers to slow down payments and protect customers from scams is ineffective and overlooked by users, according to new research* of 2,000 UK adults by Tunic Pay, an anti-fraud fintech company helping household-name UK banks detect and prevent scams before they happen, and Opinium, the market research consultancy.

The research is published today - a month after new rules by the Payments Systems Regulator came into effect, requiring all UK banks to reimburse customers who are proven victims of Authorised Push Payment (APP) scams up to £85,000 per case.

Nico Barawid, Co-founder of Tunic Pay, comments: “The PSR’s important new rules have placed more financial burden on banks than ever before to get a handle on the potentially £4 billion problem of APP fraud. The banks have channelled huge amounts of money and effort into creating friction to slow down payments and get customers thinking harder about who they’re sending their money to. Is the friction working? Not a lot. If two in three people aren’t paying attention to the warnings they click through, the system is broken and the fraudsters win. Slower payments don’t mean slower fraud.”

Over four in five UK adults (85%) are aware of the actions their banks are taking to protect them from scams. Those who have experienced a scam before tend to be more aware (90%) compared to those who have never been targeted (82%). Some of the most recognised scam prevention methods include: 

• questions to make sure the user knows who they are paying (43%) 

• warning statements about fraud risks (41%)

• and requesting a biometric ID, for example, a fingerprint (38%). 

But this fraud-fighting friction is not slowing down customers’ payment decisions: 

• Only a third (33%) of UK adults say they read their banks’ fraud warnings before making a payment

• And fewer still (32%) say that warnings are helpful because they force them to slow down and think about the payment they are making

Three quarters (75%) of UK adults don’t think delaying some payments for up to 72 hours is an effective method to preventing fraud, and a similar proportion (73%) say requiring a customer to call their bank to answer questions about the payment is not effective either.

Customers of online or challenger banks are less likely to read every warning notice than customers of traditional high street banks (30% vs 36%), but marginally more likely to say that the warning notices are effective (35% vs 34%). 

Can prenentative action replace the friction?

One in seven (15%) of the survey’s respondents would like to see their banks use fewer warnings and more technology to detect and prevent scams happening in the first place. This rises to a fifth (21%) of customers of online or challenger banks. 

A third (30%) of UK adults are concerned that warning notices put up by banks during the payment process are a way for banks to shift the responsibility for getting scammed to their clients. This sentiment is more prevalent among older respondents (34%) vs younger (25%), and customers of online/challenger banks (36%) vs traditional high street banks (32%). 

Nicky Goulimis, CEO of Tunic Pay adds: “Customers are tired of outmoded fraud prevention measures that aren’t working for them. They expect banks to step up with smarter, proactive security measures rather than relying on friction and delays that ultimately put the responsibility on customers. This shift in expectations is a huge opportunity for fintechs and a call to action for banks to prioritise real-time detection and more intuitive safety features."