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UK payment companies have called on the industry watchdog to delay a contentious fraud reimbursement plan, two weeks after its head resigned amid growing criticism of the proposals.
The Payments Association on Monday urged the Payment Systems Regulator to delay incoming rules that would force banks and payment companies to reimburse victims of “authorised push payment” fraud up to £415,000 per claim from October.
In a letter to David Geale, PSR interim managing director, the trade body said delaying implementation of the rules by a year would allow the industry to “ensure the right policies, technology and systems are in place to avoid permanent damage to the UK’s payment industry”.
The request comes two weeks after Chris Hemsley quit as PSR head following a backlash from industry and the government over the rules
City minister Bim Afolami last month hit out at “significant problems” with the regulator’s proposals on APP fraud, adding to public criticism of independent watchdogs by Treasury ministers in recent months.
About 30 members of the Payments Association previously complained in a letter to Afolami that the changes to reimbursement could threaten the survival of smaller fintech companies. The trade body is lobbying to lower the reimbursement threshold to £30,000.
The trade body told the PSR in a briefing paper on Monday that delaying the rules would also give regulators and legislators more time to involve tech and social media companies in the reimbursement process.
Britons lost about £459.7mn to APP fraud — which includes purchase scams, online investment schemes, and criminals tricking victims into sending them money by posing as a contact — in 2023, according to trade body UK Finance.
Almost 80 per cent of APP fraud starts online, said the bankers’ trade body.
Riccardo Tordera-Ricchi, head of policy and government relations at the Payments Association, said that if the changes were put in place as planned, “the prudential risk and requirements to participate in the UK payments market will increase significantly”.
“It will 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,” he added.
The PSR was contacted for comment.
The plea from the industry comes on Geale’s first day at the helm of the watchdog after the PSR confirmed Hemsley’s “imminent” departure at the end of last month.
Geale has sat on the PSR’s board since 2020 and was previously director of retail banking at the Financial Conduct Authority, the main financial regulator.
UK Finance has also previously voiced concerns about the proposed changes, saying they risk encouraging more “complicit fraud” if criminals pose as victims to claim compensation illegitimately.
However, a spokesperson for the trade body said it was not calling for an extension of the rules and that its members were working towards the October deadline.
