The UK Payment Systems Regulator (PSR) has updated the status of APP scam protections.
APP scams incorporate digital fraud, where users of financial or transactional Apps send money to bogus sites or fraudsters. The PSR says that in 2023, there were over 250,000 cases of App fraud.
Of these cases, eight in 2023 were for scams over £415,000, and 411 were for more than £85,000. So, the majority were for under £85K. PSR noted that almost all “high value” scams were for multiple smaller transactions.
To the relief of payment/transfer providers, the PSR said it is consulting on a new reimbursement cap. If confirmed, this would bring the cap in line with the Financial Services Compensation Scheme (FSCS) limit, which is currently £85,000. Previously, the cap had been set at £415,000—far more.
The PSR explains that the lower reimbursement cap will cover more than 99% of claims. David Geale, PSR’s managing director, says UK consumers will still receive “world-leading protections” with the lower amount.
CI received feedback on the announcement from two Fintechs active in the payments sector.
Dima Kats, CEO and founder of Clear Junction, said they support the ongoing dialogue between regulators and industry participation.
“The concerns raised across the industry about the potential impact of the new regime have clearly been acknowledged. While the new threshold of £85,000 remains high, it’s reassuring to see that feedback is being heard and considered. This move strikes a better balance between protecting consumers and ensuring the continued innovation and competitiveness of the financial sector. It’s a positive step forward in maintaining a fair and effective regulatory framework. Such open dialogue between the industry and regulators is a hallmark of the UK financial services industry, setting it apart from other regions by fostering a more responsive and adaptable business environment.”
Tribe Payments MD Alex Reddish, called the reduction in the cap a positive step towards safeguarding the growth of the UK fintech industry.
“By addressing this issue, the PSR is not only enhancing the security framework but also supporting the broader financial ecosystem. While it’s crucial to tackle the underlying problem of fraud, which cost the industry nearly £5 billion in 2023, balancing these measures with the need to nurture and sustain the fintech sector is equally important. This move signals a commitment to both innovation and security, ensuring that the UK remains a global leader in financial technology while actively working to mitigate the impacts of fraud.”
The consultation on the cap closes on September 18, 2022.
The implementation date for APP scam protections commences on October 7, 2024.
