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UK Payments Lobby Presses For APP Fraud Rules Delay After Top Regulator Quits

June 11, 2024
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Authorised push payment (APP) fraud rules should be delayed by a year, the UK payments lobby has said, after the head of the Payment Systems Regulator abruptly left his post.

Authorised push payment (APP) fraud rules should be delayed by a year, the UK payments lobby has said, after the head of the Payment Systems Regulator (PSR) abruptly left his post.

The Payments Association, whose members include Visa, Mastercard, major UK banks and fintechs such as Modulr and Thredd, said in a press statement on Monday (June 10) that the rules would create a significant increase in prudential risk and market participation requirements.

The new rules require payments providers to reimburse defrauded customers within five working days, and are due to come into force on October 7, 2024. Costs will be split 50/50 between sending and receiving payment service providers, with a maximum reimbursement of 拢415,000 and an optional 拢100 excess.

Both faster payments and retail CHAPS payments are included in the regulatory scope, with special provisions for vulnerable consumers.

鈥淚f the current changes are implemented, we believe the prudential risk and requirements to participate in the UK payments market will increase significantly, resulting in reduced competition and an increase in the unbanked population,鈥 said Riccardo Tordera-Ricchi, head of policy and government relations for the Payments Association.聽

Tordera-Ricchi warned that the current trajectory could also result in an increase in cost and friction of real-time payments and a decrease in investment into the UK fintech market due to higher risks of failure and lower profitability. The Payments Association suggests the PSR postpone implementing FPS rules by 12 months.聽

The rules have generated controversy across the payments ecosystem, marking the first time that the PSR has faced intense backlash from industry. One payments advisor told 麻豆视频社区 the rules were 鈥渏ust so crude鈥 and said 鈥渋t's no wonder the banks are going berserk鈥.聽

Some payments industry insiders have suggested that Chris Hemsley, who left his job at the top of the watchdog on May 31, had been the face of the rules and subsequently the fall guy, with one branding the compliance requirements 鈥渘aive and misconceived鈥. The PSR has聽denied that this is the case.聽

According to the Payments Association, a delay would allow for the full operationalisation of the Pay.UK case management system, activation of dispute resolution mechanisms and completion of the Confirmation of Payee rollout.

The association states that Pay.UK currently lacks crucial functionalities such as exceptions handling, remediation and dispute resolution mechanisms found in other global schemes, questioning the feasibility of implementing the APP fraud reimbursement scheme through Pay.UK's framework by October 7.

The association also supports a "one-ecosystem approach", echoing the Home Affairs Committee's call for a fraud levy on social media companies to fund victim compensation.

While endorsing reimbursement, the Payments Association has sought regulatory changes by proposing to reduce the threshold from 拢415,000 to 拢30,000.

This aligns with average scam costs of 拢11,000 for businesses and 拢1,500 for consumers, keeping the threshold significantly higher than typical losses.

The 拢415,000 threshold has often been a sticking point for payments insiders, with one source sympathetic to the PSR鈥檚 proposals recently telling 麻豆视频社区 that they 鈥渉aven鈥檛 a clue鈥 how that number was determined.聽

In response to a request for comment from 麻豆视频社区, the PSR鈥檚 interim director, David Geale, pointed out that APP fraud continues to be a problem and that last year victims lost around 拢450m. 鈥淲e therefore need to act quickly,鈥 he said. 鈥淎fter more than two years of extensive consultation and industry engagement, our requirements will come into effect on 7 October.鈥

Geale said that the regulator will continue to engage with and support industry, taking into account all feedback 鈥渁s we move forward and as industry works hard to implement the systems and processes needed for the new reimbursement requirements鈥.


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