UK Regulator: Banks Have Five Days to Reimburse Push Payments Fraud Victims

Authorized push payments (APP) fraud victims in the U.K. could soon see faster reimbursements.

That’s according to Great Britain’s Payment Systems Regulator (PSR) which on Wednesday (June 7) announced new requirements for banks and payment companies at a time when APP fraud is costing Britons close to £500 million (about $622 million) per year. No timeline has been set for when the requirements will go into effect.

“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,” said PSR managing director Chris Hemsley.

“That means everybody who makes payments can do so with much greater confidence, knowing that they will be better protected against fraudsters.”

According to a PSR news release, the new rules will incentivize all payment firms to take action, as both sending and receiving firms will split the cost of reimbursements 50/50. Most APP fraud victims will be reimbursed within five days, with added protection for vulnerable customers.

In addition, the industry “will have clearer guidance to follow, including around the ability to apply a claim excess and maximum level of reimbursement, which the PSR will consult on later this year,” the release said.

As PYMNTS reported in May, the U.K. has been plagued by a payments fraud epidemic in recent years, with APP fraud climbing 40% between 2020 and 2021. This type of fraud involves criminals tricking a person or business into sending money to a fraudsters’ account.

According to Kate Frankish, chief business development officer at Pay.UK — which is working with PSR on this project — APP can be difficult to identify, especially for financial institutions

“From a bank’s perspective, it looks like a real payment, because the customer authorized it using all of their credentials. But it’s either going to an account that doesn’t belong to them or it’s going to a real person who has been scammed out of the money,” she told PYMNTS.

This issue has led regulars like the PSR to make the changes announced Wednesday.

“But while refunding victims could be seen as a step in the right direction, experts have flagged a moral hazard risk as the rules could make individuals less inclined to take the necessary precautions when making payments,” that report said.

In an interview with PYMNTS, Suzie Miles, partner at U.K. law firm Ashfords, said these rules could impact frictionless banking transactions but argued that putting a greater burden on financial institutions to prevent fraud is not out of place.

“Given that banks are best placed to mitigate the risk, I can understand why this approach has been taken,” Miles said, noting that the wider payment-service provider (PSP) sector will need support to make sure the rules produce the intended results.