The Payment Systems Regulator (PSR) has set a crucial date of 7 October 2024 for implementing new protections against Authorised Push Payment (APP) scams, reaffirming its commitment to tackling this growing threat. Alongside this announcement, the PSR has also published a consultation on high-value APP fraud cases, focusing on reviewing and possibly revising the reimbursement cap for victims of APP scams.
Addressing high-value fraud
APP fraud is a significant problem within the UK’s financial ecosystem, with devastating consequences for its victims. In its review of high-value fraud cases, the PSR revealed that in 2023 alone, out of over 250,000 fraud instances, 18 cases involved losses exceeding £415,000, while 411 cases surpassed £85,000. The review highlighted the complexity of these frauds, noting that many large-scale scams were made up of multiple smaller transactions, which reduces the effectiveness of transaction limits as a protective measure. This issue is key in demonstrating why stronger protections beyond transaction limits are necessary.
The cap and why it matters
The current maximum reimbursement limit of £415,000 is under review, and the PSR is proposing a new cap aligned with the Financial Services Compensation Scheme (FSCS) limit of £85,000. The decision to align with the FSCS limit ensures consistency in consumer protection standards, making it a familiar and well-understood safeguard for victims. This adjustment aims to provide robust consumer protection while continuing to incentivise financial firms to enhance fraud prevention mechanisms.
Although the proposed cap is lower, it is crucial to note that more than 99% of claims would still fall within this new limit, safeguarding the majority of consumers. This move ensures the vast majority of cases are still covered, while also aligning protections with familiar regulatory standards. The PSR’s review found that most high-value fraud cases are made up of multiple smaller transactions, which shows that managing fraud exposure through transaction limits alone is less effective.
Ensuring global leadership in fraud protection
The PSR’s decision to adjust the reimbursement limit while still covering over 99% of claims highlights the UK’s position as a leader in fraud protection. The regulator made it clear that these measures ensure stronger protections than anywhere else in the world, reinforcing the UK’s global leadership in anti-fraud efforts. By setting the cap at £85,000, the PSR aims to strike a balance between ensuring robust consumer protections and encouraging financial firms to continue enhancing their fraud prevention strategies.
David Geale, the PSR’s Managing Director, commented:
“We listened to concerns about the reimbursement limit and committed to collecting more evidence to inform our approach. As a result, we are now consulting on a limit that still covers the vast majority of authorised push payment scams and strikes the right balance. Under our proposals, consumers in the UK will still receive world-leading protection, payment providers will still be heavily incentivised to improve anti-fraud protections, and we maintain effective market competition and innovation.”
Impact on PSPs and market competition
For larger financial institutions, which have been operating under the voluntary Contingent Reimbursement Model (CRM) Code, the adjustment is smaller. However, smaller firms will need to make more significant changes to meet these new standards. Despite the size of the adjustment, the PSR emphasises that strong consumer protection must remain a priority, and firms are expected to make the necessary changes to meet these requirements.
With the urgency of the situation, the PSR’s evidence-based proposal strikes a careful balance between consumer protections, incentivising firms to implement robust anti-fraud measures, and maintaining market competition and innovation. The regulator also remains committed to conducting a post-implementation review to ensure these protections continue to evolve in line with industry changes.
Looking forward: October implementation
One key takeaway is that the implementation date for these new protections remains unchanged. Consumers and businesses alike can expect these enhanced protections to come into force on 7 October 2024. Pay.UK, which operates the Faster Payments system, through which most APP fraud occurs, has confirmed its readiness for the launch.
The consultation period closes on 18 September, and the PSR will carefully consider responses before confirming its final approach by the end of the month.
How Neopay can help
At Neopay, we understand that staying compliant with evolving regulatory standards is critical for payment service providers (PSPs). Our tailored compliance solutions ensure that PSPs not only meet their obligations but are well-prepared for upcoming changes like the PSR’s new APP fraud protections. Whether you need assistance with regulatory authorisations or developing fraud prevention frameworks, Neopay is here to guide your business through these significant shifts.
The new reimbursement requirements place additional responsibilities on PSPs, particularly smaller firms. With Neopay’s expertise, we can help you navigate these changes, ensuring that your systems are compliant and that you are equipped to protect your customers against the rising threat of fraud.
To find out more about how we can support your business, contact our team here.
