The UK payments industry is pushing back against the Payments Systems Regulator’s (PSR) incoming requirements around authorised push payment (APP) fraud reimbursement. 

According to Bloomberg, 30 members of The Payments Association (TPA) have signed a letter raising concerns about the new rules. Set to come into force in October, the rules will require payments firms to reimburse victims of APP fraud.

The reimbursement will be split 50/50 between the paying and receiving company. This could see a maximum reimbursement of £415,000 (€483,923/$520,760), which has promoted concern regarding the financial burden this could place on smaller companies.

In a comment sent to Payment Expert, Silvija Krupena, Director of the Financial Intelligence Unit at RedCompass Labs, remarked: “It’s no surprise to see UK challenger banks and payment firms push back on the PSR’s fraud victim refund plan because many simply can’t afford to do it. 

“They have already made huge investments into fraud prevention, adopting tools such as confirmation of payee which helped banks stop £650.7m worth of fraud in the first half of 2023.

“These new rules will pile even more pressure on banks and payment providers in what is already a challenging time for the industry. Liability has shifted from consumers onto banks, and they clearly have an important role, but we can’t ignore where the majority of fraud originates. 

”A scam often begins with a simple message on social media platforms, which rake in billions of dollars in profits each year, so it’s equally important we hold these firms to account.”

PSR’s reimbursement rules will come into effect on 7 October, but the regulator is already considering an expansion of the requirements. Last week, PSR proposed extending the rules to the Clearing House Automated Payment System (CHAPS).

This would build on the Bank of England’s existing requirements around reimbursement for direct banks and payments providers participating in CHAPSm significantly broadening the scope of the PSR’s reimbursement policies.

The regulator seems intent on introducing its rules, despite concerns raised by the UK payments sector. In an interview with Payment Expert at the Pay360 conference in Mach, TPA’s Head of Policy and Government Relations, Riccardo Tordera-Ricchi, explained these concerns.

“We don’t think this will solve the main problem,” he said. “It will bring satisfaction to victims, which is important, but we are not trying to prevent fraud happening, we are just treating the bad consequences of that. 

“Companies which will suffer are those which do not have the capital backing, they may leave the country and this will mean less innovation and less competition – we have to think through the unintended consequences of what is a very good thing.”

It is undeniable that fraud is a continuing, potentially rising, threat to Britain’s payments network and more importantly, the consumers it serves. Some prominent financial institutions such as Lloyds, TSB and Revolut have all issued warnings about rising instances of fraud.

What is also clear, however, is that while the sector is aware of and keen to address fraud, it does not see reimbursement as the sole solution. TPA, and other payments stakeholders, are encouraging education and prevention as a better means to combat fraud. 

This is a sentiment Krupena agrees with adding: “To win the fight against fraud, banks need to take preventative action. They need to focus their investment on exploring new technologies such as AI and data-driven, persona-based approaches, which can flag suspicious transactions and stop them before it’s too late. 

“This will potentially save hundreds of millions of pounds from being stolen, and most importantly, protect more people from having their savings stolen and lives turned upside down by fraudsters.”

Regardless of payment objections, PSR seems set on implementing its rules on 7 October and has been encouraging payments providers to prepare since December 2023, when the requirements were first announced.

There are a number of preparations firms can make. Last month, Christine Reisman, Managing Director at Protiviti, shared her views with Payment Expert on what strategies banks can adopt to navigate the incoming regulations.