Australian credit unions achieve breakthrough results by separating fraud from scams
Australian credit unions have emerged as leaders in member protection by recognizing that fraud and scams require fundamentally different prevention strategies. By combining shared technological infrastructure with member-focused human intervention, some institutions are now detecting 44% of scam transactions compared to a 19% industry average, while Australia's world-first scam prevention legislation creates accountability across banks, telecommunications providers, and digital platforms.
Australian credit unions are rewriting the playbook on member protection by making a critical distinction: fraud and scams are different threats that demand different defenses. The results speak for themselves. Some customer-owned institutions are now stopping scams at rates more than double the national average, proving that the member-first model creates measurable security advantages.
The difference hinges on a single word: authorization.
Fraud involves transactions made without the member's knowledge, like credit card skimming or account takeovers.
Scams are transactions a member initiates after being deceived, such as romance schemes or fake investment opportunities.
This distinction carries profound consequences for who bears the loss. Under Australia's ePayments Code, financial institutions generally cover unauthorized fraud. But when members authorize a payment, even under manipulation, they typically bear 96% of the losses.
This liability framework has driven Australian credit unions to innovate in prevention rather than relying on after-the-fact reimbursement. It's a philosophy now enshrined in Australia's Scams Prevention Framework legislation, which passed Parliament in February 2025 as the world's first cross-sector scam prevention law.
Leading institutions post standout detection rates
Regional Australia Bank* exemplifies what's possible when credit unions treat scam prevention as a strategic priority. The customer-owned institution, which began as New England Staff Credit Union in 1969, has achieved a 44% scam detection rate compared to the 19% industry average for reviewed institutions reported by Australia's securities regulator.
The bank's success stems from a holistic program spanning governance, prevention, detection, and response. Key innovations include biometric liveness detection during identity verification, monthly limits on cryptocurrency transactions, and mandatory 24-hour holds on high-risk transactions. But the most distinctive element is the Scam First Aid Procedure, specialized training that empowers frontline staff to function as first responders when they suspect a member is being victimized.
"Our data analysis shows that we are detecting and stopping two times more scams than comparable banks, and our mutual difference is being demonstrated with customer scam cases being resolved in half the time of other reviewed banks," said Regional Australia Bank's Chief Operating Officer Les Bailey, in a statement released by the Customer Owned Banking Association.
Intentional friction produces measurable results
Great Southern Bank (which also functions as a credit union despite its name) has taken an approach that might seem counterintuitive for member service: intentionally slowing down transactions. By adding deliberate payment friction to online and mobile banking, the credit union creates moments for members to reconsider suspicious transfers. The results validate the strategy with a 26% drop in scam volumes in the last financial year and 63% of potential scam losses prevented or recovered.
The credit union has also invested in sophisticated member routing technology that connects fraud and scam victims to specialists within seven seconds. A revamped security and fraud hub has seen visitor traffic increase 30% year-over-year, with targeted materials developed specifically for members over 65, a demographic disproportionately targeted by scammers.
Teachers Mutual Bank Limited became the first customer-owned institution to implement a payee verification system. In its first two months, more than 17,000 members used the feature, which prevented more than $720,000 in mistaken payments or potential scams. The technology alerts members when account details don't match the intended recipient's name, catching both honest mistakes and deliberate misdirection.
Shared infrastructure levels the playing field
Australian credit unions overcome their smaller individual scale through CUSCAL, the nation's largest independent payments provider outside the four major banks. CUSCAL provides AI and machine-learning-powered fraud monitoring to more than 100 client institutions, enabling small regional credit unions to access the same detection capabilities as major banks. The platform processes more than 500 payments per second, with continuous learning models that adapt to evolving fraud tactics.
The November 2023 Scam-Safe Accord, a joint commitment by the Australian Banking Association and Customer Owned Banking Association, has accelerated industry-wide capabilities. All 54 member credit unions joined the accord, committing to a $100 million industry investment in confirmation of payee technology rolling out through 2025, mandatory membership in the Australian Financial Crimes Exchange, biometric verification for all new online account openings, enhanced warnings and payment delays for high-risk transactions, and monthly limits on payments to cryptocurrency platforms.
Since the accord launched, credit unions participating in data exchange have increased sixfold. The collaborative approach has contributed to a 33% decline in reported scam losses, the first decrease in years.
World-first legislation creates ecosystem accountability
Australia has taken a fundamentally different approach from other nations by focusing on prevention rather than reimbursement. The Scams Prevention Framework legislation, which passed in February 2025, is the world's first cross-sector scam prevention law. It imposes prevention obligations across banks, telecommunications providers, and digital platforms, with penalties up to $50 million per offense.
The multi-sector approach reflects recognition that scams originate outside banking channels. "Scams have devastated too many Australian lives. The Scams Prevention Framework Bill 2025 prioritizes prevention, disrupting scammers targeting Australians and ultimately preventing scams before they happen," said Michael Lawrence, CEO of the Customer Owned Banking Association.
The legislation enables members to seek compensation when a regulated entity's breach of obligations contributes to their loss, but stops short of mandatory reimbursement. The prevention-first model appears to be working. Australia is one of the few Western countries showing declining scam losses, with scam prevention efforts contributing to a 33% drop in scam losses in 2024.
Lessons for the credit union movement
Australian credit unions demonstrate that a smaller scale can become a competitive advantage in fraud and scam prevention. By distinguishing clearly between unauthorized fraud and authorized-but-deceived scam payments, they've developed targeted defenses for each threat. Shared infrastructure through industry collaboration enables sophisticated AI-powered detection, while member-focused cultures support human interventions that stop scams in progress.
The sector's performance validates the prevention-first approach. Rather than simply reimbursing members after losses occur, Australian credit unions are investing in the friction, education, and detection capabilities that prevent losses entirely. With detection rates reaching 44% at leading institutions versus a 19% industry average, and scam losses declining for the first time in years, the strategy demonstrates what's possible when credit unions leverage their fundamental member-first advantage in security and trust.
For credit unions worldwide, the Australian example offers a clear message: the member relationship model isn't just about better service. It's a structural advantage in protecting members from increasingly sophisticated threats.
* Understanding Australia's customer-owned banking structure
Australian credit unions often operate under names that include "bank" rather than "credit union". Despite the name change, these institutions remain customer-owned with the same cooperative structure.
