Banks and payment firms in the UK will be required to reimburse victims of Authorised Push Payment (APP) fraud, under new requirements outlined by the Payment Systems Regulator (PSR).
Chris Hemsley, managing director at the PSR, said the changes put the UK at the forefront of the fight against APP fraud globally.
The PSR has said the new minimum standards to reimburse APP fraud victims will come into force in 2024.
According to official figures from UK Finance, APP fraud losses totalled £485.2 million in 2022.
A paper published today (7 June) revealed that payment firms will have to reimburse all “in-scope customers” who fall victim to APP fraud “in most cases”, with the cost of reimbursing victims to be split 50:50 between sending and receiving payment firms.
PSR also revealed that the new rules in Faster Payments – the payment system across which the vast majority of APP fraud currently takes place – will strengthen Pay.UK’s ability to tackle fraud.
The regulatory body wants most APP fraud victims to be reimbursed within five business days and said that additional protections will be offered for vulnerable customers.
“Once implemented, our changes will deliver a major shift from the status quo, giving everyone across the payments ecosystem a reason to act to prevent fraud from happening in the first place,” Hemsley said.
“That means everybody who makes payments can do so with much greater confidence, knowing that they will be better protected against fraudsters.”
He added that by setting out the reforms now, the industry “will be ready to act once new laws come into effect”.
“We will continue to work with Pay.UK, industry, consumers and organisations beyond the payments sphere to drive effective intervention and start to turn the tide against APP fraud,” Hemsley said.
The PSR published a series of timelines, starting in July, when it will consult on the draft legal instruments to put reimbursement requirements in place. The following month, the PSR plans to consult on the maximum level of reimbursement and claim excess, and additional guidance on the customer standard of caution.
The PSR will give the final legal instruments to Pay.UK and a further consultation on the legal instrument to be given to PSPs in October, in readiness for the requirement to take effect next year.
Alan Ainsworth, strategy and policy director at Open Banking Limited welcomed the PSR’s proposals.
“There has been a sharp rise in payment fraud which is now the most prevalent type of crime in the UK. Regulators and the industry recognise the importance of developing new data and intelligence sharing tools to improve fraud prevention,” Ainsworth said.
“Data and data sharing is the cornerstone of Open Banking. We are pleased to be leading the fraud workstream to further protect consumers as part of JROC’s recommendations for the next phase of Open Banking to achieve this.”
“As payment scams become ever more sophisticated, it is right that the Government, the regulator and industry work together to ensure victims are not left out-of-pocket by fraudsters,” added Economic Secretary Andrew Griffith MP.
“In parallel, the Government is looking at how to enable banks to have the ability to identify and pause suspicious payments inflight where appropriate.”