LSEG's Global Solution Combats Rising APP Fraud Threat
The London Stock Exchange Group (LSEG) is addressing the rapidly growing threat of authorised push payment (APP) fraud, as cross-border payments continue to rise globally with volumes expected to surge from US$150tn in 2017 to an estimated US$250tn by 2027.
APP fraud – also referred to as relationship and trust scams or credit push fraud – involves criminals manipulating victims into authorising payments by exploiting human psychology through deception and social engineering techniques.
According to LSEG Risk Intelligence analysis, global losses from APP scams could reach a staggering US$331bn by 2027, a figure that exceeds Portugal's GDP, demonstrating the enormous scale of this growing problem.
In the UK alone, APP fraud accounted for approximately US$576m in losses during 2023, representing about 40% of all UK payment fraud, which itself made up 40% of all reported crime in the country last year.
The situation is equally concerning in other markets, with Australia reporting losses of US$207m in the year to June 2024, despite having a population only a third of the UK's size.
In the US, business email compromise (BEC) ranked as the second most expensive cybercrime according to the FBI, with 21,489 complaints and US$2.9bn in reported losses in 2023.
Dal Sahota, Global Head of Trusted Payments at LSEG, explains that APP fraud specifically targets human vulnerabilities.
“APP fraud relies on tricking or confusing victims into making payments they would not otherwise make. It exploits trust, fear, urgency, or curiosity to manipulate people into authorising transactions,” Dal says.
According to Aravind Narayan, Global Head – Digital Identity & Fraud Proposition at LSEG, this problem has personal significance.
“This issue hits close to home for me because my mother was defrauded through a smishing scam about five years ago.
“She clicked a link, went through the whole process, and someone called asking for an OTP code. She lost quite a lot of money for our situation back then,” Aravind reveals.
Cross-border payments significantly increase fraud risk due to fragmented regulatory landscapes, differing security policies, data sharing restrictions across jurisdictions, and the rapid pace of modern instant payment systems that leave little time for banks to identify suspicious transactions.
The growing role of AI in payment fraud escalation
The rise of artificial intelligence has dramatically compounded these threats, enabling criminals to create increasingly sophisticated and convincing scams that are harder to detect.
“What we're seeing is fraudsters heavily using AI to scale up their scams.
“We've observed two key developments: first, using AI to accelerate from '60 miles an hour to 120 miles an hour' in terms of volume, and second, creating entirely fictitious suppliers with convincing voice and video capabilities,” Dal explains.
Aravind points to a particularly concerning trend.
“One of our partners gave us a scary statistic – there's been a 3000% increase in face-based fraud since early last year because it's now very easy to layer faces over images, making it increasingly difficult for normal identity verification systems to detect these deepfakes,” he says.
The business impact extends far beyond direct financial losses, with organisations facing operational inefficiencies, higher processing costs, risk and compliance issues and fragmented operations when managing cross-currency payment risks.
“Without real-time verification, it becomes harder to detect and prevent fraudulent transactions, exposing companies to financial losses.
“And in cross-border payments, where no direct relationship exists between sending and receiving banks, tracking and recalling funds becomes extremely complex and time-consuming,” Dal continues.
LSEG's Global Account Verification solution addresses critical vulnerabilities
LSEG has been helping businesses combat these threats through its Global Account Verification (GAV) solution, allowing businesses and individuals to verify payment recipients before authorising transactions.
“Last year alone, we'd performed around a quarter of a billion verifications. We're agnostic to payment schemes, so whether it's a payment on the ACH in the US, RTP, Fed Now, or Zelle, we sit at that payment initiation stage, not at the rail stage,” Dal shares.
The solution connects to payment verification schemes across multiple countries through a single API, avoiding the need for businesses to integrate with multiple national systems.
“We harmonise different standards by operating to the highest possible level. There are different standards in different countries, but we raise the bar to the highest standard possible, particularly around data privacy and information security,” Dal explains.
LSEG's approach prioritises both security and user experience, distinguishing between what Dal calls “bad friction” and “good friction” in the payment process.
“Banks and payment service providers should make it easier for customers to access their payment data – that addresses bad friction.
“The good friction is giving customers certainty that they're paying a legitimate person or business. Any extra seconds spent on that verification is worthwhile,” he says.
Regulatory landscape evolves as governments tackle growing threat
“Governments around the world are doing good things, especially in the UK with their reimbursement schemes and liability shifts"
Regulatory frameworks worldwide are beginning to respond to the APP fraud threat, though Dal believes we're still at the early stages compared to more established anti-money laundering regulations.
“We're very much at the inception level in terms of regulation coming to fruition to combat APP fraud. It reminds me of where anti-money laundering regulation was back in 2000, which then saw continuous refinement and new approaches develop globally,” Dal observes.
The UK has been at the forefront, with the Payment Systems Regulator making verification of payee checks mandatory for banks and payment service providers since October 2023. Similar EU regulations will come into force in October 2025.
Meanwhile, other countries are developing their own approaches, with the EU implementing verification of payee schemes and the US focusing on enhanced fraud monitoring regulations.
“Governments around the world are doing good things, especially in the UK with their reimbursement schemes and liability shifts.
“The EU is following with verification of payee initiatives, and the US is implementing fraud monitoring regulations. But regulation is still lagging compared to how quickly fraudsters are innovating,” Aravind adds.
Corporate treasury departments particularly vulnerable to sophisticated attacks
While consumer fraud receives significant attention, corporate treasury functions remain particularly vulnerable yet often underreported due to reputational concerns.
“The sector that remains hidden in all of this is the corporate side. It's significantly under-reported as businesses don't talk about fraud as publicly as consumers do,” Aravind explains.
Dal agrees, noting that LSEG has identified a critical gap in the market.
“In terms of global trade, we've identified a principal sector that we feel is underserved. We've been in dialogue with numerous corporates who really suffer from this issue but hesitate to report it publicly.”
“The sector that remains hidden in all of this is the corporate side. It's significantly under-reported as businesses don't talk about fraud as publicly as consumers do”
The problem is particularly acute for smaller businesses that may not have the financial resources to absorb losses.
“What they're starting to see is a cost burden from rising interest rates. Reducing fraud allows them to manage their cash flow better. The smaller businesses coming up to be bigger enterprises are really suffering from that,” Dal notes.
LSEG is expanding its solution to address these corporate needs, including developing new features like batch verification capabilities to help businesses verify payments up to 30 days in advance.
The company is also investigating how AI can be used for fraud detection and prevention.
“AI gives you the ability to scale up and detect anomalies across millions or billions of transactions – whether that's unusual bank account information, device details, or biometric data,” Dal continues.
Ultimately, Dal believes effective fraud prevention requires collaboration across multiple stakeholders.
“There are multiple participants required to address these macro challenges – regulators, banks, market participants like us, and trade associations.
“All these players have to come together to solve this problem, just as we've seen happen in the anti-money laundering space,” he concludes.
Follow LSEG Risk Intelligence on LinkedIn to access their upcoming report, Defeating APP Fraud, which unpacks the cross-border payments landscape and efforts by governments to tackle APP fraud in more detail.
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