"This approach can severely disrupt the user experience, especially when it impacts essential payments like mortgages."
- Jack Kerr, director of Appdome
Banks will be given new powers to put a three-day hold on suspicious payments to investigate potential fraud.
New laws proposed by the Government will extend the time that payments can be delayed by 72 hours where there are reasonable grounds to suspect a payment is fraudulent and more time is needed for the bank to investigate.
Currently banks must either process or refuse a payment by the end of the next business day. The government hopes that this will help reduce the amount of money lost to fraud in the UK, which was estimated to be £460 million last year.
Economic Secretary to the Treasury, Tulip Siddiq said: "Hundreds of millions of pounds are lost to scammers each year, targeting vulnerable communities and ruining the lives of ordinary people.
"We need to protect these people better, which is why we are giving banks more time to investigate suspicious payments and break the criminal spell that scammers weave."
However, while a frozen bank account serves as a protective measure for consumers, Jack Kerr, director of Appdome, says "this approach can severely disrupt the user experience, especially when it impacts essential payments like mortgages".
He added: "To avoid these complications, financial institutions must implement automated fraud detection systems that operate in real-time, identifying threats before they escalate. By doing so, companies can minimise the need for disruptive measures like account freezes, allowing consumers to maintain seamless access to their funds.
“More specifically, banks need to place a strong focus on the security of their mobile apps. According to YouGov data, 33% of Brits use their mobile banking app daily, which makes them a prime target for fraud. Simultaneously, consumer expectations are shifting, and Appdome’s recent survey of mobile consumers revealed that 99.5% of consumers expect mobile apps to protect them against fraud. This underscores the responsibility to prioritise security to not only comply with regulations but also to enhance user trust and loyalty.
“By enacting proactive fraud defences, such as continuous monitoring and behavioural analytics to notice unusual mobile banking app activity alongside incoming calls, banks can immediately intervene and significantly reduce the necessity for reactionary measures that have a longer-term impact on the customer.”
Mark Munson, MD of payments at Moneyhub, added: “As the fight against fraud intensifies, the recent decision to grant banks the power to delay payments for up to four days reveals a critical flaw; banks are focused on slowing down payments rather than cutting off fraud at its source.
“If fraudsters can still open accounts and move stolen money through the financial system, simply pausing payments is a band-aid solution. We need real reform—stricter KYC controls, collaboration from social media platforms, and national digital identity infrastructure to stop fraudsters from entering the system in the first place. The solution lies in prevention, not just delay.”
