The battle for trust: The billion-dollar reality of APP scams

Scammers manipulate customers into authorizing payments to accounts under their control — whether by impersonating a trusted contact, posing as a legitimate business, or leveraging social engineering tactics. The victim is tricked into thinking the transaction is genuine, making it nearly impossible to detect through conventional fraud detection systems.

As real-time payment systems continue to expand globally, the scope and scale of these scams are growing. Fraudsters are already taking advantage of immediate payments that leave no window for a transaction to be spotted and stopped. The ACI Scamscope report projects that real-time payments-related APP scams will comprise 80% of all APP scam losses by 2028, reaching an estimated $6.1 billion.

The direct financial losses from APP scams are alarming; however, the more pressing concern is the impact on consumer trust. The ACI Scamscope report reveals that 25% of scam victims will leave their bank or FIs after the financial crime. Moreover, 20% will close their accounts altogether, often without opening a new one.

For banks, this is a critical concern. FIs don’t just lose money in the form of scam payouts to victims, they can also lose customer trust — a bedrock that once eroded is incredibly difficult to rebuild.

This isn’t just a short-term challenge. In an era where customers expect instant payments and seamless digital experiences, failing to protect customers from fraud can lead to long-term reputational damage. As consumers become more aware of the risks, they will increasingly prioritize safety and reliability when choosing where to bank.

The industry needs to act quickly to address vulnerabilities. While progress has been made with card fraud, APP scams require collaboration across institutions. Some regulators are pushing for legislation that mandates banks to educate customers, inform them of risks, and reimburse the victims.

Mule accounts are crucial for completing APP scams, as they facilitate the movement of stolen funds. Focusing on the money leaving accounts isn’t enough to stop these scams. Scammers employ various techniques to create new mule accounts, often using stolen identities and data from the dark web. To effectively address this issue, FIs should provide incentives for receiving banks to enhance their detection and shutdown efforts. This approach ensures that these banks are not only avoiding losses but are also actively preventing fraud.

One possible approach is to make receiving and issuing banks liable for losses, like in the U.K., with a 50/50 liability shift. Another is integrating anti-fraud and anti-money laundering (AML) functions, enabling better information sharing. Traditional fraud prevention methods, such as transaction limits, are losing effectiveness, so using artificial intelligence (AI) to analyze real-time transaction data is key to making smarter, faster decisions based on present risks rather than relying on outdated data.

APP fraud can’t be solved by traditional fraud prevention tools alone. FIs must take proactive steps to combat this growing issue to potentially save millions in payouts and maintain trust in their brand.

Three ways that financial institutions can combat APP scams:

1. Invest in intelligent solutions
   The rise of APP scams requires financial institutions to modernize fraud detection. Traditional methods like transaction monitoring are no longer enough. By leveraging AI, machine learning, and real-time data predictive analytics, solutions can detect suspicious activity in real-time, preventing fraudulent transactions before funds are transferred. These technologies help identify patterns and collaborate across institutions to spot scam networks faster.
2. Cross-industry collaboration
   APP scams are a global issue that require a unified response. Fraudsters often operate internationally, using mule networks to launder stolen funds. FIs must break down data silos and collaborate with banks, payment providers, and governments to share intelligence to track fraudulent activities, making it harder for scams to slip through.
3. Strengthen consumer education and communication
   Raising awareness is key to preventing APP scams. FIs should educate customers about scam red flags and offer guidance on verifying transactions. Real-time alerts for suspicious activity can help prevent fraud, empowering consumers to protect themselves, while providing the tools and support to reduce risk.

Fraudsters have many tools to generate APP scams, using the internet, social media, and other channels to target vulnerable consumers. Banks can’t wait for another industry to address the issue, especially with increasing government and customer demands for protection.

FIs must act now — investing in smarter fraud prevention systems and shared intelligence to shut down mule accounts.

The future of banking depends on trust. As the payment landscape changes, so must the tools used to safeguard it. To win the battle against scammers, banks must invest in more effective fraud management before the cost of inaction grows even higher.