The Payments Systems Regulator (PSR) has confirmed that the cap on authorised push payment (APP) fraud reimbursement will stand at £85,000.
The regulation is set to come into effect for UK payments firms on 7 October. It will require companies to reimburse victims of APP fraud split 50/50 between the sending and receiving firm.
PSR stressed that the regulation will cover 99% of APP claims and will provide a ‘strong financial incentive’ for companies to make improvements to fraud prevention. The requirement is significantly less than the initially proposed cap of £415,000.
Announced by PSR earlier in the year, the £415,000 cap was met with an extensive backlash from the industry. The Payments Association (TPA), representing much of the UK payments industry, went as far as calling for a £30,000 limit.
Stakeholders argued that the £415,000 limit would place a heavy burden on British payments firms, particularly startups and SMEs, which make up the bulk of the sector. PSR made its changes after consulting payments stakeholders, including TPA and others, over the past few weeks.
TPA and other stakeholders, including firms like TSB and Revolut, also argued that the regulation did not factor in the responsibility social media firms have for fraud prevention, due to APP fraud often being perpetrated via these platforms.
The trade body notably published its manifesto this week, reiterating its argument that social media firms should shoulder some responsibility for fraud reimbursement. TPA and clothes will likely be happy with the news, though as noted above the trade association was calling for an even larger cut to the cap.
Not all payments stakeholders are pleased with the outcome, however. Dan McLoughlin, Fraud and Security Specialists at Lynx Tech, a fraud prevention firm, asserts that the logic behind the £415,000 cap ‘was clear’, setting a message to banks to ‘prevent fraud or be prepared to pay’.
“Dropping the value of reimbursement so dramatically takes away a big part of banks’ financial motivation to prevent fraud,” he says.
“While most APP fraud cases will still be covered by the regulation, the dropping shows an unwillingness from banks to accept responsibility and make tough decisions. It takes away their drive to invest in robust fraud detection and prevention systems, which ultimately safeguard consumers.
“The constant bank lobbying to reduce the liability and pause the legislation shows organisations are seeing this as purely a punitive solution rather than a positive step in reducing fraud. Bold moves are often required to drive change and the reduction in the payout limit takes some of that boldness away.”
