Thrive under PSR legislation
Help protect your customers and minimise fraud reimbursements
Under the Payment Systems Regulator’s (PSR) rules, firms using Faster Payments will need to reimburse victims of APP fraud in virtually all cases, with liability split between both the sender and the receiver. The shift to mandatory reimbursement and inclusion of the receiving organisation represents a step change for many banks and payments services providers, who need to adapt swiftly to prevent soaring reimbursement costs and corresponding reputational damage.
Firms that haven’t focused on reimbursement costs in the past or who don’t have the correct fraud systems in place also need to absorb an increase in operational costs as they need to employ more people to manage and resolve cases.
Firms that operate under PSR rules need to ensure that their tech-stack is fuelled by the right data enabling them to gain a 360-degree view of customers, that they can draw on globally shared fraud intelligence and that they are able to apply machine learning and AI models to monitor threats in real-time.
Regulations can also be a catalyst for innovation, and firms looking to thrive under PSR are looking at how these measures can be deployed in ways that not only protects them and their customers, but that also enhances their reputation and customer experience.
The challenges and solutions
Gaining a 360-degree customer view
Challenge: Identifying suspicious accounts with a single platform view that removes silos.
Solution: Layering customer intelligence from multiple sources such as transactional, digital and behavioural data to build effective security.
Tapping into global shared intelligence
Challenge: Knowing whether an account is fraudulent based on limited in-house data.
Solution: Overlaying your customer data with international, cross-industry fraud intelligence to identify suspicious activity and give confidence over legitimate accounts, even for new customers.
Real-time fraud monitoring
Challenge: Catching fraud early and stopping the payment at source.
Solution: Implementing advanced analytics, quality data and AI to scrutinise transactions in real-time to flag suspicious payments before they are completed.
Mule account detection
Challenge: Identifying money mule accounts and separating the scammers from the victims.
Solution: Enabling real-time assessments and quick deployment of treatment strategies, using machine learning models to distinguish between complicit, witting and unwitting mules.
Cost assessment for reimbursements
Challenge: Evaluating the financial impact of reimbursement obligations.
Solution: Assessing potential exposure to app fraud reimbursements, preparing for potential increases in fraud losses as a cost of doing business.
Keeping customers happy
Challenge: Balancing robust fraud prevention with a positive customer experience.
Solution: Developing responsive systems to promptly identify and address suspicious inbound payments, without compromising user satisfaction or causing avoidable friction.
Stop the mules, stop the fraud
Where a scam is taking place there is also a money mule at the other end waiting to receive the fraudulent funds.
Our data science team have developed machine learning mule propensity models, utilising functionality such as Advanced Payment Screening – assessing both incoming and outgoing payments – to detect the likelihood that a payment is being sent to a mule account.
An illustrative movement of funds through a mule network. Prior to receiving fraudulent funds, mule account holders make small arbitrary credits and debits to establish a payment history. In this context, the £10k payment from a fraud victim therefore looks atypical and can be used as a reliable fraud indicator.
Layering security to build an effective response
LexisNexis® Risk Solutions can help you put in place multiple layers of defence to quickly identify legitimate customers, alert you to fraud risk and mitigate the impact of mandatory reimbursement.
Link Insights across multiple dimensions
Integrating multiple different data points is an important differentiator for effective fraud prevention strategies. A more effective approach should not only include inbound and outbound payments or transfer of funds – but use broader data and insight to intercept mule accounts more efficiently and help prevent the flow of fraudulent funds.
Look at more than the transaction: look at multiple transactions, connections, data, people and behaviour for a more robust way to combat fraud.
Leverage global, cross-industry knowledge
Collaboration through knowledge-sharing initiatives can enhance organisations’ ability to make better informed risk assessments.
Through collaborative data networks, like the LexisNexis® Digital Identity Network® that provides global digital identity insight from billions of transactions, or consortiums that facilitate more direct data sharing, organisations can gain better visibility of mule operations spanning multiple institutions and detect mule accounts and other fraudulent activity more efficiently.
Optimise identifying suspicious patterns across broad data sources with advanced machine learning
Helpful guidance
PSR rules create new challenges across the whole financial services sector, with the impact arguably being felt most keenly by smaller banks, challengers and payment services providers who are not accustomed to mandatory fraud reimbursement, who lack the internal resources of Tier 1 Banks and who have no easy way to calculate their exposure to risk due to limited retrospective data and a sharp increase in the volume of scams expected as fraudsters turn their sights away from the well protected larger institutions in the hunt for easier targets.
LexisNexis® Risk Solutions supports firms of all sizes ranging from small PSPs through to Tier 1 Banks (we work with all 10 of the largest banks in the UK) and offer a comprehensive suite of data and technology solutions designed specifically to fight fraud and help you thrive under PSR regulations.
To help firms finesse their strategies, we are offering complementary consultation sessions to help understand what is required under PSR rules, how to assess exposure to risk and what support is available to safeguard against escalating fraud-related costs. These sessions are 60-minute non-commercial discussions with a specialist. If you have any specific areas you would like to discuss then please outline them in the form below.
Request a PSR readiness consultation
Book a complementary 60-minute non-commercial conversation with a specialist.
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