The Payment Systems Regulator (PSR) has clarified the reasoning behind a review of its authorised push payment fraud (APP fraud) reimbursement policy. However, it has not confirmed whether or not a new reimbursement cap has been set.
Reports emerged this week that the PSR was going to reduce the reimbursement cap from £415,000 to £85,000. This is to be divided 50/50 between sending and receiving payments firms in the event a customer is a victim of APP fraud.
Various industry stakeholders voiced concerns about the £415,000 reimbursement cap, including The Payments Association trade body. The industry argued that the cap would place a heavy burden on UK payments firms whilst also citing other industries it believes has a responsibility for reimbursing and protecting customers.
The PSR states that it has taken these concerns onboard and is now consulting on a new cap. The change in figures is based on the fact that of the 250,000 cases of fraud in 2023, 411 saw an excess of £85,000 defrauded, whilst 17 saw £415,000 defrauded.
“We listened to concerns about the reimbursement limit and committed to collecting more evidence to inform our approach,” said David Geale, PSR Managing Director.
“As a result, we are now consulting on a limit that still covers the vast majority of authorised push payment scams and strikes the right balance.”
The payments industry will likely be relieved by the PSR’s consultation, even more so if the £85,000 limit is finally decided upon. As stated above, firms were concerned about the potential financial impact, as various banks argued that social media should shoulder some responsibility due to fraudsters making extensive use of these platforms.
However, its announcement comes shortly after the full impact of APP fraud was laid bare in figures released by the Financial Ombudsman Service. The data states that over half of the more than 8,000 instances of fraud between April-June were APP fraud.
Some commentators have told Payment Expert that the cap reduction would provide less protection for customers. Others have stressed that more must be done to prevent fraud, as well as reimbursing victims.
“The rise in mobile fraud is powered by the ever-growing sophistication of tools cybercriminals have at their disposal,” says Jack Kerr, Director of Appdome, an anti-fraud and anti-malware app developer.
“The almost universal use of mobile banking and social media means that these and other mobile apps have become prime targets for scammers, where social engineering attacks, like vishing (voice phishing), are regularly being used to exploit and target unsuspecting users.
“While the Authorised Push Payment (APP) offers some protection against APP scams, more action is needed to combat these growing threats. Mobile brands must ensure they have robust security and anti-fraud measures built into their mobile apps to look after their consumers.”
PSR asserts that the new cap will still cover 99% of claims by volume, and states that it ‘fully expects all firms to meet their obligations as responsible providers’. It also states that the cap, stressing ‘if confirmed’, would be in line with the Financial Services Compensation Scheme’s (FSCS) own limit of £85,000.
Regardless of changes, PSR states that the reimbursement requirement will still come into effect on 7 October, as originally planned.
Geale concluded: “Under our proposals, consumers in the UK will still receive world-leading protection, payment providers will still be heavily incentivised to improve anti-fraud protections and we maintain effective market competition and innovation.”
