Commonwealth Bank of Australia (CBA) deputy chief executive David Cohen has revealed the bank is currently developing an internal policy to compensate victims of financial scams, as leaders of each of the big four banks weigh in on prospective plans by the Federal Government to introduce a UK-style scam compensation code.
In response to questioning at a parliamentary Standing Committee inquiry into the big four banks, Cohen said CBA wanted to “fill the gap” until – what is predicted will be – the inevitable introduction of a Federal Government-mandated industry code that would compel banks to reimburse victims of payment scams.
“We recognise the need to [create this policy], and it’s work we’re undertaking right now,” the CBA deputy chief said, adding: “we need to try to fill that gap on what we will compensate and what we won’t”.
Cohen, while not elaborating on the extent of the in-house policy or what specific scams it would cover, noted the inherent challenges of developing an internal policy given the unique circumstances of each scam and scam victim.
“It’s not a straightforward area as you can imagine. There are many different circumstances involving different levels of customer involvement, so to come up with something ‘black and white’ is not an easy proposition.”
Also present at the inquiry, CBA chief executive Matt Comyn said the bank, Australia’s biggest retail banking provider, wants “be a leader in this area”.
CBA no doubt has an interest in being a precedent-setter for such a policy, with Comyn acknowledging the “limitations” of the UK code – a model the Australian Government may look to largely replicate.
Since introducing the policy, he said, “scams have only increased” in the UK.
Cohen added: “We’ve looked at the UK model very closely,” noting that the country has experienced a “250 per cent uptick” in scams since the policy – voluntary since 2019, and set to be made mandatory next year – was introduced.
Comparatively, the scam rate in Australia has increased by around 33 to 34 per cent over the same period, he said.
Under the UK scheme, customers identified as legitimate victims of a payments scam are compensated for the amount lost within five days of notifying their payments facilitator.
Since the scheme’s launch in 2019, UK banks have paid back around 66 per cent of scam losses to victims.
Shifting the burden of responsibility onto banks and other payments providers “is not an effective strategy,” Comyn said, with leaders of each of the big four banks arguing that this would simply create a more lucrative target for scammers.
“We will participate in the industry code,” the CBA chief said. However, he cautioned that “the outcomes for consumers just aren’t good enough.”
Security sidelined for payments efficiency
Since the introduction of fast and near real-time payments in 2018, Comyn stressed that the priorities of “safety and security” within Australia’s payments architecture have been relegated behind the push for “convenience”.
While the industry’s focus on “efficiency, convenience and innovation” has been understandable and welcome, he said, this inordinate emphasis may have been to the detriment of consumers’ safety and security.
“We absolutely should be putting safety and security above a number of other enhancements [in] the payment system that we’re investing in. That’s absolutely critical and appropriate… particularly at the moment.”
Comyn also called for the re-introduction of some level of “friction” into the payments process, particularly for higher-risk transactions.
The CBA chief praised Financial Services Minister Stephen Jones’ wholesale and cross-sector efforts to tackle financial scams, and welcomed the recent launch of the ACCC-led Anti-Scam Centre.
He said CBA alone has invested upwards of $238 million in mitigating fraud scams and boosting its cybersecurity capability.
“We will happily continue that, but others must also contribute to dealing with these threats.”