Mandatory reimbursement for APP fraud shows promising early results, says PSR.
Mandatory reimbursement for Authorised Push Payment (APP) fraud is showing early signs of success, according to the Payment Systems Regulator’s (PSR) first data review since the rules came into force.
Published on May 15, the PSR’s update shows 86% of losses from APP scams were reimbursed in the first three months of the policy, with over £27m returned to victims.
“The policy is having an impact and we’re seeing positive results. A high proportion of APP scam victims are being reimbursed consistently across a larger number of PSPs,” newly appointed PSR Managing Director David Geale said.
“And while it is too early to draw firm conclusions based on the period covered by this data, we have not seen evidence of spikes in claim volumes that some had feared would occur under the policy.
The PSR said the policy is helping to “level the playing field” among payment firms, with more providers now reimbursing victims of APP scams than ever before.
Previously, only customers of the 10 firms signed up to the voluntary CRM Code were likely to receive compensation. However, in the first three months of the mandatory rules, 60 firms reimbursed victims, marking a sixfold increase.
This trend is driven by a characteristic of the ruling, which requires sending and receiving firms to split the reimbursement cost 50:50 up to £85,000. This maximum reimbursement was just one of the rule’s features, which caused a regulatory storm last year.
“Now that both parties in the payment journey (the sending PSP and the receiving PSP) share the cost of reimbursing victims, there is a much stronger incentive for all PSPs to prevent APP scams from occurring in the first place,” Geale said. “We are pleased to see PSPs starting to collaborate more in the effort to fight this fraud.
Another controversial aspect of the policy is the concern it might encourage reckless behaviour from consumers, known as “moral hazard”, by making them feel overly confident they would be reimbursed regardless of how cautious they were.
To minimise this risk, firms are allowed to apply a £100 excess and reject claims where the consumer was deemed “grossly negligent”. However, early data suggests this has been rare in practice. Just 2% of total claims were rejected due to the consumer standard of caution not being met.
Fraud rates fall despite initial fears
One of the biggest concerns ahead of the new rules was that APP scam volumes would spike, with bad actors potentially seeing the reimbursement guarantee as an incentive rather than a deterrent.
However, data referenced in the PSR statement suggests the opposite has occurred. In the first three months, APP fraud claims totalled around 46,000, lower than the 56,000 average seen during similar periods in 2023, according to UK Finance figures.
While the PSR cautioned direct comparisons are difficult due to changes in definitions and reporting, it noted there is no evidence of the feared increase in fraud rates.
While the data paints a promising picture, the PSR is clear it’s still early days. A formal independent review of the reimbursement policy’s impact is set for October 2025, a full year after its implementation.
“We must never forget that this is about protecting real people from the emotional and financial consequences of having their money stolen – that must remain our strong focus,” said Geale.
