In this year’s first Parliament session, Minister for Communications and Information Josephine Teo outlined strategies for an inclusive and safe digital society. Key among these are new security standards for financial apps and guidelines for telcos to look out for vulnerable consuemrs.

Crisis of confidence?

The Workers' Party (WP) warns of a looming "crisis of confidence" in digital transactions.

WP Member of Parliament (MP) Jamus Lim suggests capping scam victims' losses at $100 to $500 – although it’s unclear how Lim derive this range – with the banks and telcos bearing the rest of the loss. His argument was that the write-offs form but a “small fraction of a bank’s balance sheet”, while the impact of scams can often be “ruinous” for the depositor. It is a palatable solution on first impression — Goliath is better-endowed, he should bear the brunt as compared to David.

Lim’s idea isn’t new.

MAS introduced the Shared-Responsibility Frame (SRF) last October. Here, if financial institutions or telcos are negligent, they bear full losses. Lim finds this insufficient and unjust, arguing that companies could easily sidestep their responsibilities.

Scams are increasingly sophisticated

The very problem with scams is that they are amorphous — the form they take becomes more sophisticated by the day, with the measures needed to stem them matching in complexity.

Society often overlooks that scams typically succeed due to some initial cooperation from victims, even if under deception. Common scams like job, e-commerce, fake friend call, phishing, and investment scams usually require victim participation at the outset. As scammers' tactics become increasingly sophisticated and harder to identify, the ultimate defense against both current and emerging scams is individual vigilance.

Even with the most advanced digital banking protection technologies, financial institutions are not immune to scams that exploit human emotions, the most vulnerable element, and which even the most sophisticated systems can’t always protect against.

If we bill the bank, the average consumers pay in the end

Lim's proposal, which involves banks and telcos being held responsible for every scam, could lead to these costs being transferred to the average consumer. Should scam incidents rise to unsustainable levels, banks might start offloading these costs onto even those consumers who haven't been affected by scams. This is particularly concerning given the current cost of living. Moreover, if this approach is implemented, there's a risk that customers might prefer keeping their money at home, which could disastrously impact the banking system's liquidity.

The proposed framework by Lim could also inadvertently encourage fraud, where "victims" collaborate with scammers for financial gain.

WP’s proposal lacks depth

The WP's proposal addresses the aftermath – “who pays?” - not the prevention of scams. While offering some relief to victims, it could prove impractical and unsustainable as scams evolve.

Ultimately, WP’s proposal lacks depth, and is seen as a populist, short-sighted approach with potential long-term drawbacks.