Fraud complaints on the rise at challenger banks, data suggests

Fraud Stone, Staffordshire / United Kingdom - July 30 2019: Close up photo of virtual bank cards: Monzo, Revolut, Starling Bank. Conceptual for competition on the UK fin tech market.

Fraud complaints at three of the UK’s top challenger banks have increased this year, according to data seen by UKTN.

First reported by Sifted, data from the Financial Ombudsman Service (FOS) revealed that neobanks Monzo, Revolut, and Starling all dealt with an increased number of fraud complaints in 2022 compared to the year prior.

The number of fraud complaints against neobanks has also reached a three-year high, according to the data shared by FOS.

The predominant scam type was authorised push payment (APP), which involves fraudsters convincing victims to transfer money through deceptive tactics, such as posing as a mobile phone provider’s security team.

Complaints of these scams in all three of these firms have increased from H2 in 2021 to H1 this year.

At Monzo, new complaints rose from 174 to 255. New complaints at Revolut increased from 157 to 352, while they rose from 121 to 175 at Starling.

A spokesperson from Revolut told UKTN that the company is “committed to fighting financial crime” and that its “fraud detection systems warn the vast majority of customers being targeted by criminals”.

The spokesperson added: “We take our responsibility to protect and support our customers extremely seriously and have made significant investments in our systems, processes and people to ensure that our customers are safe as we scale and grow.”

A spokesperson for Starling told UKTN that it works “extremely hard” to combat fraud but added the “methodology, and the conclusions that have been reached [by the data] are not valid and do not show an accurate and proportionate representation of APP scams at different banks”.

UKTN has contacted Monzo for comment.

While the data covers an increase in complaints of fraud from neobanks, financial scams across the board are said to have increased in the UK as the cost of living crisis in the UK has created unstable financial conditions.

The Financial Conduct Authority (FCA) this year has rolled out warnings to consumers suggesting there is an increased risk of financial fraud.

Challenger banks, which usually have no physical branches and build services on top of open banking technology, have soared in popularity over the past five years, which the FCA previously said is “starting to weaken” the dominance of legacy banks.