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Australia & New Zealand can learn from the UK’s experience by making banks pay for scam losses

Banking / opinion
Australia & New Zealand can learn from the UK’s experience by making banks pay for scam losses

By Muhammad Al Mamun*

British banks will soon be required to reimburse customers who fall victim to authorised push payment fraud – where a scammer convinces you to authorise a payment, generally by masquerading as a legitimate business or person.

The new rules from the UK’s Payment Systems Regulator are intended to incentivise all businesses involved in payments to take more action against scam activity, with reimbursement costs split 50:50 between the bank that sends and the bank that receives the payment.

There is a strong case that banks and other payment providers in Australia and New Zealand should be made to do the same. Scam-related losses are soaring, and banks are falling short of detecting, stopping and recovering losses.

In 2022 Australians lost at least $3.1 billion to scams – an 80% increase on 2021. The Australian Competition and Consumer Commission says the actual losses were far higher, because about 30% of victims don’t report their loss to anyone.

While the biggest losses came from investment scams (totalling $1.5 billion), payment redirection scams – where a scammer impersonates a business or individual asking for payment – amounted to A$224 million.

Among the most vulnerable groups are older people (25% of losses were reported by those aged 65+), people with a disability (6% of reported losses), and people from culturally and linguistically diverse communities (almost 10% of reported losses).

What are Australian banks doing?

No regulations oblige Australian banks to reimburse scam victims, though some banks have self-governed reimbursement policies.

While banks have dedicated fraud teams to prevent scams and support victims, the most recent review of the four major banks’ processes by the Australian Investments and Securities Commission, published in April, says they detected and stopped just 13% of scam payments.

Reimbursement policies and practices varied from bank to bank but the overall rate was low – ranging from 2% to 5%.

The review described the banks’ approaches to liability, reimbursement and compensation as “inconsistent and generally very narrow”.

Why the UK has made banks responsible

The greater obligations being imposed on British banks follows attempts by the UK’s Payment Systems Regulator to improve consumer protections through a voluntary code of conduct.

Introduced in May 2019, this voluntary code was intended, under certain conditions, to ensure the reimbursement of victims of “authorised push payment” scams. These conditions included the customer taking reasonable care and notifying any scam incident to the bank.

It had modest success, with 46% of reported scam losses being reimbursed between 2020 and 2022.

But the Payment Systems Regulator wants 95%. So it has pressed for a mandatory reimbursement scheme. Under the new provisions money must be reimbursed within 48 hours of a fraud being reported.

The idea is to get banks to put more effort into detecting and preventing scams.

Overall, the UK has accepted the need for a more regimented regulatory approach over a market-based one.

A more pragmatic approach needed

While the Australian Investments and Securities Commission’s own reports have revealed the sorry state of scam prevention, management, and reimbursement practices at major banks, the regulatory body is still not walking in the footsteps of the UK. It is instead advising banks to improve their governance and scam management practices.

The Australian Banking Association, which represents the banking sector, has strongly argued against regulation supporting mandatory reimbursement. It has even suggested this could increase scamming losses because of the risk customers will take less care if they know any losses will be covered by their bank. It has called for greater personal responsibility in preventing scam losses.

But such an argument ignores the effects of the digitisation push by financial service providers, which has made scamming so much easier. Scammers are also becoming more sophisticated.

The statistics speak for themselves. Scamming losses are increasing. Recovery rates are meagre. A more pragmatic approach based on this reality and banks’ fiduciary responsibilities is needed.The Conversation

*Muhammad Al Mamun, Senior Lecturer in Finance, La Trobe University. This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Interesting read. Thanks.

I understand NZ banks were early adopters of digitisation. Starting with introduction of eftpos and hole in the wall money machines.

I suspect their motivation being to reduce transaction costs and enhance bank profitability, irrespective of the cost and inconvenience imposed on clients.

I recall when Kiwibank closed its branch in Karori, where I lived, and worked from my home. I'm pretty sure there was a surcharge for using another bank's ATM for cash withdrawals at that stage. Many elderly Kiwibank customers were disadvantaged because the only Kiwibank ATM was at Marsden village, about 1km over the hill from the main shopping centre. I was inconvenienced because when paid by cheque or cash  I had to drive to Johnsonville or Lambton Quay to deposit.

There's a demographic that is not tech savvy. This makes them vulnerable to digital abuse.

Bank's need to shoulder responsibility for adverse outcomes that are arguably directly attributable to their self serving efficiency innovations. Yes, bring regulation akin to the UK.


In the 80s we may have been early with eftpos, but we're at least a decade behind these days. 

UK has had realtime payments between banks 24x7 for 15 years.    Meanwhile in NZ we are just starting to do transactions on the weekend, but still not realtime nor 24 hours a day.


I can understand the appeal of making the banks take the losses, but I also suspect that there would be unintended consequences.

Banks are risk averse corporates, so I expect one result would be dozens more hoops to jump through to pay anything to anyone...


There was a article a short while ago in which a NZ bank account was used to channel fraudulently obtained money from another NZ bank. You'd think the bank being used for the fraud would have a inkling of responsibility for running a fraudulent account. Not a chance.


Banks are really slack when it comes to preventative measure. I still get the odd sms from my bank and they are legit messages (I just don't act on them)
Interestingly in UK, the Govt is making the bank responsible for scam victims.


I recently lost my wallet, the person who found it put 15 transactions through across 2 banks before I blocked the cards.  The banks (ANZ & Westpac) did reimburse me for the fraudulent transactions.  Still this could be avoided if they had to enter a pin for each transaction.



Perhaps you should instead be banking with the likes of BNZ , where you can turn contactless payments on or off in their banking app.


Of course it is then 100% your fault if fraudulent transactions go through before you disable the card. That is why BNZs Aussie owners allowed this feature to be put in. In a perfect world, we would all be paid in cash, and would travel to shops and other businesses to spend it. Nobody would be tracking us, keeping an eye on us, manipulating us. Just the way I like it.


No thanks, Cash is a pain in the ass.    


I was going to say great idea by BNZ idoubtit, but then sit23 makes a good counterpoint too!


LOL. This has happneed 3 times at my company. I have asked the banks to disable payWave on our cards but they won’t do so.  


I can imagine the banks guaranteeing to pay out for push payment fraud could result in many "victims" becoming part of the fraud?

  • Victim: "oh no, I just lost $50k to a scammer in India"
  • ANZ Bank: "oh, no worries, here's your $50k"
  • 6 months later
  • Victim: *receives $25k cut from friend into TSB account*


our government is always so slow to implement change