Both sending and receiving banks involved in transactions under the UK’s Faster Payments scheme will now be required to share the cost of reimbursements in cases of authorised push payment (APP) fraud, following new rules established by the Payment Systems Regulator (PSR).
The regulator announced that these new rules, set to take effect in 2024, are designed to encourage banks to take more proactive measures to prevent APP fraud in the first instance. The PSR stated, “The new requirements will prompt a step change in the culture of payments to improve fraud prevention and focus all firms on protecting people.”
APP fraud has emerged as a significant issue in the UK, with losses nearing £500 million over the past year. Consumer advocacy groups and lawmakers have been urging banks to address the escalating problem of APP fraud and expedite reimbursement processes for innocent victims.
Under the updated regulations, most victims of APP fraud can expect to be reimbursed within five business days, and additional protections will be implemented for vulnerable consumers. By the end of 2023, the PSR plans to announce details regarding the claims process, maximum reimbursement limits, guidance on customer standards of caution (gross negligence), and the necessary legal instruments to enforce the new regulations.
Chris Hemsley, managing director at the PSR, emphasized that these changes will represent a significant shift away from the current practices, providing all stakeholders in the payments ecosystem with a compelling reason to take action against fraud. “This means that everyone who makes payments can do so with much greater confidence, knowing they will be better protected against fraudsters,” he remarked.
Treasury Minister Andrew Griffith expressed support for this initiative, stating, “It is essential that the Government, the regulator, and the industry collaborate to ensure that victims are not left out-of-pocket due to fraud.” He also noted that the Government is exploring ways to empower banks to identify and pause suspicious payments in real-time where appropriate.