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UK banking industry riddled with fraud and flighty customers

Written by William De Vijlder  
  • Jan 01, 1970
  • 6 min read

Howard Davies said that the UK can lay claim to being the banking-fraud capital of the world, and that customers are partly to blame

At The Asian Banker Future of Finance Summit, Howard Davies, chairman of the NatWest Group, rang the bell on the prevalence of banking fraud in the UK, and the “promiscuous” nature of users flocking to neobanks that threaten the risk appetite of financial institutions. The summit was held in Bangkok, Thailand, from 14 to 15 June. Davies, the keynote speaker, moderated his punches but threw them just the same.

Davies, who was also the first chairman of the UK’s Financial Services Authority, said: “The UK can proudly claim to be the banking fraud capital of the world. I’m not totally sure why this is, but it’s something to do with the promiscuity of our customers.

“People are remarkably credulous, and there’s more fraud in the banking system in the UK, than anywhere else in the world.”

He tackled the subject of neobanks and fintechs like Revolut and Monzo that have taken vast numbers of customers away from traditional banking institutions, saying that consumers in the UK show no loyalty and have been easily swayed to try new banking services.

On the global banking system, he observed that it has evolved significantly since 2006, with US and Canadian banks showing significant market capitalisation growth. He said that Canadian banks, “the unsung heroes of the last 15 years”, performed exceptionally well on an asset basis. He pointed out that European banks have fallen, while Asian banks plateaued. Asian banks have experienced dramatic asset growth, but this has not impressed investors as the market cap has not responded to the growth in assets. 

Davies cited Credit Suisse’s business model as having been fundamentally unviable and likely to have failed eventually, adding that while the regulators could have mitigated red flags sooner, the Bank of England and the European Central Bank had intervened quickly enough to avert contagion.

Davies touched on regulations, commenting that emerging technologies such as blockchain, cryptocurrency, and artificial intelligence (AI) are the hot-button topics among financial players. He cautioned that while AI brings opportunities, bankers must think about defensive measures, and that the industry would be wrestling with technology risks and fraud for a long time to come.

He concluded his keynote address saying: “I hope that I have alarmed you, because that was my intention.”