Tony Craddock, Director General of The Payment Association, has written to the UK government raising his concerns about the introduction of new Authorised Push Payments (APP) fraud policies in the Online Safety Bill and the unintended consequences that could transpire.
He shared his thoughts with Payment Expert on this development and how he hopes the country’s payments sector will progress.
The UK payments industry is an undeniable success story and has emerged as a cornerstone of economic growth and technological advancements with this country at the forefront of its progress.
As the global sector surpasses the £125 billion mark, the UK can proudly claim its position as a thriving hub within this rapidly expanding sector. From the early adoption of faster payments to the seamless integration of contactless and mobile wallet technologies, we have exemplified innovation. It has also become a beacon of employment, with hundreds of companies employing tens of thousands of individuals dedicated to enhancing the financial experience for all.
Unfortunately, this status isn’t guaranteed forever – it needs to be maintained. The Payments Association seeks forever and always to preach a progressive regulatory approach that avoids unintended consequences while maintaining a balance between innovation, competition and consumer protection.
While acknowledging the commendable efforts being made to prevent fraud, we need to emphasise the need for a balanced approach that avoids undue burden on the payments industry. By aligning regulatory efforts with industry aspirations, the UK can leverage the power of payments to deliver tangible benefits to its people and solidify its position as a global leader in the sector.
In a recent open letter to Lord Johnson, Minister of State for Investment at the Department for Business & Trade, The Payments Association brought attention to specific unintended consequences that could arise from anti-fraud policies designed to combat Authorised Push Payment (APP) fraud scams. While a portion of these policies aims to effectively reduce fraud impacting the £485 million problem, the Association raises concerns about two policies and an omission.
Firstly, it is proposed that any customers that experience fraud will be reimbursed unless they have been ‘grossly negligent’. This brings with it the potential for even more fraud with people imitating vulnerability as it is defined and receive reimbursement even if they have acted intentionally. The recent Revolut scam, where over $20million was fraudulently withdrawn, illustrates how straightforward such activity can be for unscrupulous characters.
Secondly, that the cost of compensation will be split equally between the sending bank/issuer and the receiving bank/issuer. This means it will be slower to open, or even maintain, a marginal account for fear of having to pay 50% of any fraud that is claimed. This may well prompt issuers to become excessively cautious, making it difficult for vulnerable people or those new to the UK to access financial services.
Finally, the proposed policies don’t take any steps to involve social media giants in fraud prevention, even though more than 80% of fraudulent transactions take place on these platforms for some banks. The proposed Online Safety Bill is a good first step towards involving upstream actors in these processes – but it can’t be the last step.
We need to stress the potential damage that not addressing these issues could inflict upon industry players such as credit institutions, e-money institutions, and payments institutions and look for more intuitive solutions. We would do well to draw inspiration from countries like India, Australia and Brazil, where government-led initiatives have revolutionised digital identity and payments. A cross-departmental approach that recognises the systemic importance of payments as an industry is the best way forward.
Our open letter to Lord Johnson serves as a clarion call for the recognition and support of the payments industry’s integral role in driving economic growth and investment. With a progressive regulatory approach, the UK can embrace innovation, competition, and consumer protection without succumbing to unintended consequences that threaten the industry’s vitality. As the government works towards shaping policies with foresight and collaboration, the payments industry can continue to flourish, benefiting individuals, businesses and the nation as a whole.
