It is widely believed that the big name banks are the ones to entrust with your life savings, but is your account really as secure as it seems? And if the high street institutions are not the safe bet they once were, is crypto the way forward?
These questions are drawn into sharp focus by new data from the ONS, which reveals that an astonishing 2.1 million credit card and bank offences were committed over a period of just one year between March 2022 and March 2023. While this figure represents a small decrease (of 14%) relative to the same period in 2021-2022, a deep dive into the statistics in fact reveals a worrying trend.
The United Kingdom has a population of 67,888,849 (at the time of writing) and of this number 42.34 million are between the ages of 16-64 and eligible for a bank account. While 1.1 million Britons (2.5%) do not have access to a bank account, this leaves around 41.24 million people holding high street accounts. Against this backdrop, 2.1 million offences is highly significant: it indicates that one in every 19 account holders became the victim of fraud in the past year alone, with an average of 5,756 bank and credit card offences occurring every day in the UK.
Despite the decrease in the absolute total relative to the period 2021-2022, this seemingly positive trend in fact represents a rebalancing of the statistics after a bumper year, when banking fraud skyrocketed, rising to a record 2.5 million cases, off the back of behavioural changes during the coronavirus pandemic. Taking this anomaly into account and looking at longer term, fraud is on the increase and CIFAS, the UK’s fraud prevention service, reported that the UK was heading into 2023 with unprecedented levels of fraud, particularly in the case of false applications, up 45%, and identity fraud, up 34%.
Misuse of accounts is also a key concern for CIFAS, with 68% of fraud cases pointing to mule activity, which is particularly common for victims in the 21-30 year old age bracket.
On the whole, criminals tend to target Britons with longer credit histories, who demonstrate positive repayment behaviour over time and are eligible for high lending limits. So even if you’ve had your bank account for a long time and have not encountered any fraud problems before, it doesn’t necessarily mean that you are safe from becoming the victim. In fact, it puts you in the category of those most likely to be targeted.
So with fraud on the rise and criminals targeting established and affluent customers, what’s the answer for those who need to safeguard their assets?
One option, taken up by 1.1 million Brits, is simply to have no bank at all. 53% of that 1.1 million group have chosen to live their lives ‘unbanked’ because they simply don’t want a high street account: whether because they don’t trust the financial system, have got into trouble with an overdraft in the past, or simply don’t see the need for one. Statistics show that the ‘unbanked’ population are most likely to be Muslims (10%), those who are unemployed (7%), or those who are long-term sick, temporarily sick, or carers (together, 7%). There is a strong link to deprivation, with 3.6% of adults in the most deprived areas being unbanked, compared with less than 0.6% in the least deprived areas. The clear picture that emerges is that while being unbanked can be a choice for some people, for many others it is forced upon them by their circumstances.
While not having a bank account is a sure-fire way of avoiding banking fraud, stashing savings in cash comes with other risks, and not having a bank account can make life difficult in many other ways, including difficulty accessing financial products, and additional hurdles for paying bills, including losing out on the financial advantages that often come with direct debit payments. As shops, pubs and restaurants are moving closer to becoming cash-free, those without current accounts increasingly run the risk of being excluded from society.
However, as businesses move into the modern age, the UK population needs to recognise that the choice isn’t simply between banked or unbanked.
A record 12% of Brits have now embraced cryptocurrency (as of Feb 2024). The most common reason that people gave for buying cryptocurrency is the belief that it will be highly influential in the future (23%), and there is a lot of substance for this view, with the long term increase in fraud statistics indicating that high street banks are not quite the safe-haven that they were once thought to be.
That said, cryptocurrency has its own image issues to overcome. While bank fraud may currently be at “unprecedented levels”, when the UK public was asked to rate their level of trust between using crypto and banks for several different financial tasks, banks scored higher in every single category.
This perception does not reflect reality, however, because in the year from March 2022 to March 2023, only 9,129 cryptocurrency scams were reported. It is of course important to remember that significantly fewer Brits have cryptocurrency accounts than bank accounts. But even so, the number of crypto scams relative to the number of crypto holders in the UK, reveals that only 1 in every 892 crypto accounts will experience a fraud attempt, with an average of 25 crypto scams per day in the UK.
With high street banks accounts more than 32 times more likely to experience fraud than a cryptocurrency account, it’s difficult to see why crypto is often perceived as the less secure option by the general public. The answer to this undoubtedly lies in a lack of familiarity and the fear of the unknown, with a survey by Triple A showing that 70% do not invest in cryptocurrency because of a lack of knowledge.
While the statistics are very clear that cryptocurrency accounts are the safer option, it would be remiss of us not to look at the current trend in crypto fraud. As cryptocurrency usage rises in the UK, it is perhaps no surprise that crypto fraud will increase in both absolute and relative terms. Lloyds reports a 23% increase in crypto fraud cases compared with the same period last year, with the majority (66%) originating from social media.
Typically, crypto scams involve much higher sums of capital than banking scams, and the average amount lost by each victim of a crypto investment scam sitting at £10,741, far outweighing losses suffered in any other type of consumer fraud, such as romance scams or purchase scams. In comparison, fraud across payment cards, remote banking and cheques reached £726.9 million in 2022, but with 2,781,333 reported cases, this equates to an average of £261.35 lost by each victim.
The UK has seen several banks resort to blocking transfers by cryptocurrency trading platforms as a result of this rise in scams, despite the fact that banks are themselves prone to scams. However, while in the UK banks are regulated by both the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), cryptocurrency is still largely unregulated, notwithstanding Rishi Sunak’s call to establish the UK as a global hub for ‘crypto asset technology’.
Herein lies the problem: while cryptocurrency is statistically safer from incidences of fraud, bank account holders in the UK have a layer of protection if they fall victim to a scam, benefitting from Financial Services Compensation Scheme (FSCS) for their real or fiat currencies, with a guarantee for £85,000 provided to every customer by every bank. For cryptocurrency, there is no such protection, so when money is lost the consumer is unlikely to have any recourse.
Philip Hoey, Director of CoinJournal, believes that the statistics indicate a clear need for better regulation of the cryptocurrency sector:
“Despite the fact that banks are regulated by two separate bodies, account holders are still 32 times more likely to find themselves victims of fraud than crypto account holders, indicating that the traditional banking sector is no less risky even though it is more trusted. “In fact, cryptocurrencies have a cryptographic security layer that is unmatched by most high street banks, but although the transactions themselves are secure many consumers still don’t trust the exchanges and trading platforms that process those transactions. While a “Cryptocurrency Compensation Scheme” to rival the FSCS might not be on the cards anytime soon, regulatory oversight by the FCA should be welcomed by the industry because it has the potential to encourage greater cryptocurrency adoption by UK consumers.”
“Despite the fact that banks are regulated by two separate bodies, account holders are still 32 times more likely to find themselves victims of fraud than crypto account holders, indicating that the traditional banking sector is no less risky even though it is more trusted.
“In fact, cryptocurrencies have a cryptographic security layer that is unmatched by most high street banks, but although the transactions themselves are secure many consumers still don’t trust the exchanges and trading platforms that process those transactions. While a “Cryptocurrency Compensation Scheme” to rival the FSCS might not be on the cards anytime soon, regulatory oversight by the FCA should be welcomed by the industry because it has the potential to encourage greater cryptocurrency adoption by UK consumers.”