As the banking industry prepares for new regulations regarding compensation for authorized push payment (APP) fraud victims, the Payment Systems Regulator (PSR) has released data indicating that reimbursement levels are largely determined by the customer’s banking institution.
In 2023, there were 4.5 billion transactions processed through the Faster Payments system, with users reporting 252,626 cases of APP scams totaling nearly £341 million. The report reveals the reimbursement rates for APP scam cases across different firms. Under the current voluntary reimbursement framework, 67% of funds lost to APP scams were reimbursed, reflecting an improvement from 61% in 2022, though inconsistencies among firms remain.
By case volume, Nationwide reimbursed 96% of reported APP scam cases, followed closely by TSB with 95% and Barclays with 82%. Conversely, AIB fully reimbursed only 3% of reported cases, Danske Bank 7%, and Monzo 9%.
In terms of the monetary value of APP losses, TSB reimbursed 88% of losses in 2023, followed by Nationwide at 87% and HSBC at 76%. In contrast, AIB Group reimbursed just 9% of APP scam losses, Danske Bank 13%, and Monzo 17%.
David Geale, managing director of the PSR, noted that the report shows progress, with an increase in the number of victims being reimbursed compared to 2022. However, he emphasized that more work is needed, especially among smaller firms that often experience higher fraud rates. Geale pointed out that new mandatory reimbursement measures, effective from October 7, 2024, will significantly enhance consumer protection. These measures will also encourage payment firms to innovate and strengthen their fraud prevention controls.
Currently, only the sending bank is responsible for reimbursement, disregarding the critical role that receiving banks play in safeguarding the payment system. The new model will change this, sharing reimbursement costs equally between sending and receiving firms, thus providing incentives for receiving banks to enhance security measures.
Banking industry lobby groups have sought delays regarding the implementation of these new rules and proposed reducing the cap on payouts from £415,000 to £30,000, arguing that the financial burden on smaller firms could hinder competition.
UK Finance has also brought attention to the part that Big Tech companies play in facilitating APP scams. Ben Donaldson, managing director of economic crime at UK Finance, stated that while reimbursement is vital in combating fraud, it is not a standalone solution. He emphasized the necessity to protect consumers by addressing the sources of fraud, as over 90% of APP fraud originates online or through phone communications via social media, fake messages, and calls. Donaldson insisted that the technology and telecommunications sectors should also be held accountable for reimbursing victims and addressing the criminal activities that proliferate on their platforms.