June 25, 2024

The UK Payment Systems Regulator (PSR) interim chief announced that the disputed fraud compensation scheme will maintain its anticipated October implementation. The disclosure follows the PSR’s former chief resignation amid criticism surrounding the plan. The decision also disregards the Payment Association’s plea for a one-year delay to prepare and implement robust anti-fraud systems.

Despite its concerns surrounding potential harm to smaller fintech companies, the industry acknowledged the need to address Authorised Push Payment (APP) fraud, which has led to massive consumer financial losses. PSR officials asserted their dedication in helping stakeholders prepare for the new regulations.

A portion of the Payment Association members proposed a GBP 30,000 reimbursement limit, stressing that under current rules, refunding is voluntary. The PSR reiterated its commitment to work with stakeholders for seamless regulatory compliance. They noted that delaying the new rules will involve tech and social media companies in refunds.

While some industry and consumer groups express scepticism, UK Finance stated its member preparation for the October deadline. Nonetheless, concerns remain about a possible spike in fraudulent activities due to the lack of adequate safeguards. Reports suggest that some companies prioritize avoiding liability rather than protecting their customers from fraud.

## APP fraud in the UK

UK Finance reported that UK citizens lost almost GBP 459.7 million to APP fraud in 2023, much of it occurring online. Forbes reported that financial service providers reported 232,429 cases to UK Finance, up 12% from 2020. This increase is partly because of a rise in purchase scams.

## Frequently Asked Questions
### What is Authorised Push Payment fraud?
Authorised Push Payment (APP) fraud happens when a victim is tricked into authorising a transfer from their bank account to another. The scams can range from buying non-existent or vastly overpriced items to impersonating a known contact and eliciting money transfer.

### What impact will the new regulations have on small fintechs?
The new regulations could put financial stress on smaller fintech companies, especially those without the infrastructure in place to handle the anticipated reimbursement claims. However, the PSR maintains that it will support all stakeholders in complying with the new regulations, potentially offsetting some of the apprehensions.

### Why is the reimbursement limit proposed at GBP 30,000?
While it’s not explicitly stated, one reason for proposing the GBP 30,000 limit could be to create a cap on potential losses for the fintech firms, making them more able to absorb the financial implications of the new rules. However, this may not fully cover the losses incurred by some consumers. Thus, the cap amount is still a subject of ongoing debate.