UK Watchdog rejects delay for APP fraud compensation

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The Payment Systems Regulator (PSR) has rejected requests to delay new rules on compensation for authorised push payment (APP) fraud.

Interim Head of the UK payments regulator David Geale has dismissed calls from certain industry players to postpone a controversial fraud reimbursement plan, just two weeks after his predecessor stepped down amidst mounting criticism of the initiative.

Chris Hemsley, the former Head, led efforts to strengthen protections for victims of APP fraud, which includes reimbursing victims for most of their losses of up to £415,000, with the rules set to come into place in October.

Although there are several companies and organisations looking to delay the regulation, the UK Payments Association has been at the forefront of requests. The organisation outlined issues that may arise from not delaying, using Geale’s arrival to call for a 12 month postponement.

The Payments Association revealed in a letter addressed to Geale that delaying the implementation of the rules by a year would “ensure the right policies, technology and systems are in place to avoid permanent damage to the UK’s payment industry”.

However, Geale has stood firm on the date and has rejected the organisation’s request. He said: “We will continue to engage with and support industry, taking into account all feedback as we move forward and as industry works hard to implement the systems and processes needed for the new reimbursement requirements.”

According to UK Finance, almost 80% of APP fraud starts online as Brits lost around £459.7m to APP fraud in 2023. Despite these statistics, the Payments Association has been in a constant battle with the proposed regulation. 

Riccardo Tordera-Ricchi, Head of Policy and Government Relations at the Payments Association, said before the letter was sent that if the changes were put in place as planned, “the prudential risk and requirements to participate in the UK payments market will increase significantly”.

He added: “It will also result in an increase in cost and friction of real-time payments and a decrease in investment into the UK fintech market due to higher risks of failure and lower profitability.”

Perhaps the main issue with the new regulation is the recommended mandatory reimbursement threshold of £415,000, as opposed to the industry’s proposed £30,000 threshold. 

Given that the average scam costs £11,000 for businesses and £1,500 for individuals, the recommended threshold significantly exceeds typical scam amounts.

Nevertheless, it seems as though the PSR are going ahead with the original launch date of October 2024.

With APP fraud being such a big talking point in the sector, Christine Reisman, Managing Director at Protiviti, shared insights in an exclusive interview with Payment Expert, discussing strategies for banks to navigate PSR’s new requirements for reimbursing APP fraud.