To ask the Chancellor of the Exchequer, what plans his Department has to improve online banking security.
20 January 2021
The Financial Conduct Authority (FCA) requires banks to maintain effective systems and controls to prevent the risk that they might be used for financial crime. The protection for consumers who fall victim to fraudulent transactions is set out in the Payment Services Regulations 2017. The Regulations state that a customer who claims that they did not authorise a transaction on their account must receive a refund from their bank, unless the bank has reasonable grounds to suspect that the customer is liable for the transaction (for example due to customer fraud or gross negligence).
Several regulatory and industry initiatives are currently being implemented with the aim of improving online banking security and reducing fraud.
Payment service providers, which include banks, are introducing new online security procedures in response to regulatory rules known as Strong Customer Authentication. These rules intend to ensure that the person requesting access to an account, or trying to make a payment, is securely authenticated, thereby reducing the risks of fraud. The FCA is responsible for making and enforcing these rules, and providing guidance on their implementation.
Another example of improved security in online banking has been the introduction of Confirmation of Payee, a new industry initiative that aims to reduce authorised push payment scams by checking that the account name and details entered by the payer match those of the intended payee. The payer is notified if the details do not match the name they have entered, and they can choose not to proceed with the payment. This service aims to help consumers and businesses avoid making misdirected payments to the wrong account holder, as well as providing additional protection against fraud. In August 2019, the Payment Systems Regulator issued a specific direction which required the UK’s six largest banking groups to fully implement Confirmation of Payee.