Instant Payment Regulations

Within a month of each other, the UK Payment Systems Regulator (PSR) issued a consultation paper on Authorised Push Payment (APP) scams with the European Commission (EU) issuing a Proposal amending regulations, including SEPA, concerning instant credit transfers in euro.

The PSR’s goal is to make it unrelenting for criminals to defraud people using the payment system and plans to do so by:

Mandating Confirmation of Payment (CoP) for virtually all bank/PSPs 

400 bank/SPS will offer Confirmation of Payee by 31/10/24

Mandating reimbursement

The financial loss to the scammer will be split 50/50 between payer and payee bank with settlement within 48 hours

Enacting powers to removing blame on client authorising payment 

Pay.UK to be the compliance monitor

The EU proposal is to encourage a greater use of Instant Payments for the euro credits as only 11%, beginning of 2022 of European payments were instant payments (defined as within 10 seconds of the payer approving the transaction). The proposal includes amending SEPA Regulations so:

Seamless Instant euro payments to be used across Europe 

Comparable priced to traditional credit payments that take 1 to 3 days

Obligation to use CoP to alert the payer of possible fraud/error

Bank/PSP to screen clients against EU Sanctions and PEP lists daily

Clarifying the responsibility of client

Both UK and EU allow clients, when told of a discrepancy by CoP, to go ahead and make the payment. In the EU proposal the bank/PSPs should inform the client of discrepancies before payment. Should the client ignored the discrepancies and go a head and make the payment then no reimbursements will be made.  The bank/PSP to inform the client of the change in liability status before the payment is made.

Reimbursements

The UK has a well thought out, clear and detailed policy on reimbursement between bank/PSPs and consumers that is the client is refunded within 48 hours and the money split equally between the Payer and Payee bank/PSP. This is sets a new standard for the consumer and should encourage the extra 40% of people being scammed to report as the barriers to recovering their money are being eliminated. 

The EU is working on the principle that with bank/PSPs at fault should pay should pay the wronged bank/PSP. With respect to penalties applicable to infringements penalties will include administration fines up to 10% of turnover or up to £5 million for a natural person under Article 5d. The UK is to be monitored by Pay.UK.

The EU has extended bank/PSP’s responsibilities to incur penalties for non-compliance due to failure of another bank/PSP to carry out timely verifications of its clients should be compensated to that bank/PSP.

Information Verification

Both cover GDPR with the EU proposal contains suggestions to keep the KYC up to date by mandating daily checking of clients against EU Sanctions and PEP lists.

Economics

The EU proposal is to unlock the £200 billion/day currently trapped in ‘payment-float’ and to be used for consumption or investment.  

The UK, the originator of Faster Payments, is aiming to eliminate a substantial amount of the rapidly growing £500 million/year in APP fraud and increase the trust in instant payments. Given bank/PSPs only reimburse 40% under traditional banking practise then the cost of eliminating barriers could add an extra £500 million in reimbursements plus costs to implement. The EU does allow for bank/PSP to charge for CoP.

Summary

EU proposals will cover everyone using Instant euro credit Payments and the UK PSR proposals are for everyone except large corporations. 

Both will bring additional trust to using moving money in seconds and set new operating, fraud prevention and reimbursement standards fit for the digital age.

 PSR Proposal: closing date for comments 25 Nov 2022 

https://www.psr.org.uk/publications/consultations/cp22-4-app-scams-requiring-reimbursement/

EU Proposal

https://ec.europa.eu/finance/docs/law/221026-proposal-instant-payments_en.pdf