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Meta’s announcement last week that it is partnering with Metro Bank and NatWest has been welcomed in some areas of the payments ecosystem, but other commentators have warned that it needs to do more.
On October 2, Meta announced the expansion of its information sharing partnership with banks to help protect consumers against fraud.
The Fraud Intelligence Reciprocal Exchange (FIRE) is a threat intelligence sharing programme for financial institutions, allowing banks to share intelligence with the technology giant directly in a bid to stop scammers and protect users.
In the UK, NatWest and Metro Bank are the first banks in the UK to participate in this pilot, with more scheduled to join.
“This work has already seen us take action against thousands of accounts run by scammers, indicating the importance of banks and platforms working together to tackle this societal issue,” said Nathaniel Gleicher, global head of counter-fraud at Meta. “We will only beat these criminals if we work together and share relevant information related to scams.
Gleicher said that financial institutions will be able to share unique information with the company, which it can in turn use to train its systems to take action against more scams globally.
Addressing social fraud
The expansion of the pilot has been welcomed by many in the banking industry, as well as by the City of London Police and the National Economic Crime Centre, among others, and Meta says that key successes from the initial pilot include the takedown of a significant concert ticket scam network attempting to target people in the UK and US.
"Fraud has increasingly shifted towards APP fraud, moving out of banks’ direct visibility,” commented Adam Kissane, co-founder of consultancy Nua Léargas, which focuses on the payments and fintech industry.
Kissane told Vixio that there has been significant discussion in the UK about where fraud originates and the role of social media companies.
“There's growing pressure to prevent fraud at its source, which is impacting both consumers and businesses. Due to regulatory requirements, banks are bearing the brunt of these losses."
This is something that will ring true even as the scheme expands as well. For example, as of today (October 7), the UK’s reimbursement rules for APP scams are fully implemented, meaning that banks and payment firms will need to reimburse consumers who have been defrauded up to £85,000.
Much more needed
Despite Meta’s announcement, banks continue to complain that the big tech company needs to do more.
On October 3, for example, Revolut called on Meta to commit to sharing reimbursement of fraud victims, arguing that its data-sharing partnership with UK banks and financial institutions falls “woefully short” of what is required to tackle fraud globally.
“These plans are baby steps, when what the industry really needs is giant leaps forward,” said Woody Malouf, Revolut’s head of financial crime.
Malouf complained that “these platforms share no responsibility in reimbursing victims, and so they have no incentive to do anything about it. A commitment to data sharing, albeit needed, simply isn’t good enough.”
Meanwhile, Rocio Concha, Which? director of policy and advocacy, said that “while it's a positive step that Meta is partnering with UK banks to combat scams, much greater collaboration between key businesses and government is needed to put an end to the fraud epidemic”.
"Until now, the government and businesses such as online platforms, banks and telecoms firms have largely operated in silos and do not share the data they have on how these fraudsters operate, making it much harder to stop scams reaching victims in the first place,” she said.
To tackle fraud, Concha said that the government should lead a more coordinated approach by encouraging sectors to share data and stop scams spreading.
“New duties, equivalent to the obligations being introduced for banks and online platforms, should be placed on telecom providers, online advertising providers and domain registrars to ensure they verify the legitimacy of users."
Can Meta change minds?
The question now will be how much Meta’s latest move will deter regulators and governments in the UK and neighbouring EU from bringing in tighter requirements for firms.
In February, the company’s lack of accountability was highlighted by former UK parliamentarian Tim Loughton.
“Okay, so you have no skin in the game,” the former Conservative MP said during a hearing at the Home Affairs Select Committee with the company. “Therefore, what is the incentive for you to do better and to work more closely with the banks, who do have skin in the game?”
Loughton noted that UK retail bank TSB has refunded 95 percent of people who have been scammed. “About four fifths of those scams happen on your company’s platform,” he said at the time.
Diana Johnson, now UK policing minister, said the firm's anti-fraud investment "doesn't seem to be working".
The committee went on to recommend to the Home Office that a fraud levy is placed on big tech firms.
The Labour party, which is now in government, suggested in its financial services manifesto that it was considering new rules to make big tech firms more accountable for fraud.
This is also being suggested as part of the EU’s Payment Services Regulation by members of the European Parliament (MEPs), although the European Commission appears to be less enthusiastic.
When discussing the announcement from Meta and the banks, a source close to the Home Affairs Select Committee said that “the key thing will be how nicely Meta continues to play and if there's going to be tangible impact”.
Ultimately, if there is no such impact, more regulatory action could be the next step forward, and with the UK’s own iteration of the Payment Services Regulation (PSR) due an overhaul in the coming months, that could be where new rules appear.
Refining a process
"Social media platforms are becoming much more involved in deploying the right mechanisms to prevent fraud at its source,” said Kissane, predicting that Meta’s data sharing protocols will evolve across Europe over time.
To tackle fraud, Kissane said that a multi-layered approach is needed, as much of the fraud occurs outside banks' direct control. “This is a logical way forward, as it all comes down to having the right mechanisms in place."
"Greater involvement from online platforms is a logical step, considering the direction fraud is heading,” he said.
“Banks have invested heavily in real-time transaction monitoring, which has drastically reduced fraud. However, fraud has now shifted to upstream channels, and once fraudsters convince a customer to take action, the fraud occurs, particularly on digital platforms."
