Monzo and Starling have fared poorly in keeping scam volumes at bay when compared to their traditional competitors. However, GlobalData’s 2023 Financial Services Consumer Survey suggests the banks need not be worried about losing high numbers of customers.

According to the APP fraud performance report published by the Payment Systems Regulator, the two banks ranked first and second for the number of fraudulent authorized push payments (APP) were sent per million transactions. In value terms, Starling kept the total losses per million pound of transactions down to just GBP112 ($137.48), while Monzo was in the upper reaches with more than double that amount lost.

GlobalData UK Retail Banking Competitor Benchmarking report

Looking at GlobalData’s UK Retail Banking: Competitor Benchmarking 2023 report, the struggles regarding fraud that Monzo is experiencing are being felt by customers. The data from GlobalData’s 2023 Financial Services Consumer Survey shows that Monzo customers are the least satisfied with their bank’s fraud protection measures when compared to other large competitors in the UK. With a net satisfaction of 86%, Monzo scored six percentage points below the market average. Despite this, an 86% net satisfaction is still a respectable score for this attribute when compared to banks that are located in other countries.

Monzo and Starling also fell short of their rivals when comparing the reimbursements their customers received after making payments to fraudulent accounts. Monzo and Starling reimbursed just 22% and 37%, respectively, of the value of APP scams reported by victims. In terms of volume, Monzo was the lowest-ranked provider, with full reimbursements being paid to 6% of claims and partially reimbursing 2%.

Looking again at GlobalData’s UK competitor benchmarking report, when it comes to attributes that drive Net Promoter Score, fraud prevention is actually the second-least important to consumers in the UK. Furthermore, when looking at survey data, 69% of Monzo customers who were victims of financial fraud responded that they stayed with the bank even after the fraud event.

Digital banks such as Monzo and Starling are valued by many customers for their easy-to-use apps, through which users can quickly and easily verify transactions. However, this is likely the main reason for customers of these banks being targeted by fraudsters, as fraudulent transactions are verified by users directly and are more likely to be verified than if a traditional transaction monitoring method is used. Furthermore, in the UK, younger people are more vulnerable to fraud attacks, with 43% of fraud victims aged between 18 and 34 years old. This coincides with Monzo’s customer base and could be the reason for such a high volume of fraud, as 84% of its customers fall in the same age range.

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By GlobalData

Overall, it seems that digital challengers such as Monzo and Starling are putting the responsibility back onto customers when it comes to APP fraud, allowing it to reimburse its customers to a lesser extent than the traditional banks without risking a large loss to its customer base.

Harry Swain is an associate analyst, GlobalData