The Impact of the 72-Hour Payment Delay

Earlier this year, the UK government announced that banks would be given new powers to delay and investigate payments suspected of being fraudulent, in a bid to protect consumers against scammers.

The decision immediately sparked widespread discussion across the financial sector, marking a significant shift in how payments are processed. But what are the implications of such legislation on the payments industry, and how do consumers stand to gain—or potentially lose—from this delay.

While the legislation aims to safeguard consumers by creating a window to detect and prevent unauthorised transactions, it also poses operational and strategic challenges for payment providers.

How it will work, how it’s been received

Currently, a bank has until the end of the next business day to either process or refuse a payment made by a customer. The proposed laws extend this to 72 hours, where there are reasonable grounds to suspect a payment is fraudulent and more time is needed for the bank to investigate.   

The 72-hour payment would occur when financial institutions or payment platforms implement a processing hold on transactions for security reasons, such as large or suspicious payments, first-time transfers, or unusual activity. During this period, the payment undergoes verification to ensure it is legitimate and free of fraud. The sender is notified about the delay, and may be asked to confirm the transaction. If no issues are found, the payment is completed after 72 hours; if a problem is detected, the transaction may be cancelled or investigated further.

The aim is to give banks more time to break the spell woven by fraudsters over their victims and tackle the estimated £460 million lost to fraud last year alone.

The announcement was generally met with positivity. Rocio Concha, Director of Policy and Advocacy at Which? praised it as a significant step in protecting consumers, emphasising the importance of careful and targeted implementation. Similarly, Ben Donaldson at UK Finance, welcomed the proposed laws, highlighting how delaying high-risk payments could protect customers from scams, reduce psychological harm, and prevent stolen funds from reaching criminals. Both emphasised collaboration and proactive action as critical elements of these measures.

But, despite the best of intentions, we cannot ignore that this move risks tipping the balance between security and convenience too much in favour of security.

Although the new measure is designed to prioritise security, they should aim to do so in a way that minimises disruption to everyday transactions. By targeting only high-risk scenarios, the approach seeks to balance the need for enhanced protection with maintaining convenience for legitimate users. If applied selectively and thoughtfully to avoid unnecessary inconvenience for most customers, the measures have the potential to significantly mitigate fraud losses, particularly in high-risk cases.

By enabling payment providers to delay suspicious transactions, they create a crucial window to investigate and intervene before funds are lost. This pause allows for customer communication and advisory steps to prevent scams, targeting the point where criminals often rely on speed and pressure to succeed.

However, their effectiveness will depend on how well financial institutions implement the measures, including accurate risk detection and swift communication. Coordination with law enforcement and intelligence sharing will also play a key role in tackling fraud at its source, disrupting criminal networks and shutting down fraudulent accounts. While it may not eliminate all losses, it could make a significant dent in the large-scale operations of scammers.

Potential impact on the user experience

The potential impact on user experience will depend on how the measures are implemented and the type of transaction. For most routine transactions the impact should be minimal if the system is well-designed and high-risk criteria are accurately defined. Mortgage payments and other regular, predictable transfers are unlikely to trigger fraud alerts unless they deviate significantly from established patterns.

However, in cases where delays do occur, it could cause frustration for users, particularly if the transaction is time-sensitive. Clear communication from financial providers will be crucial to explain delays, assure customers of the safety of their funds, and resolve flagged transactions promptly.

If implemented thoughtfully, with robust safeguards to distinguish between legitimate and suspicious activity, the disruption to essential payments like mortgages should be rare and manageable.

What’s the alternative?

Implementing advanced artificial intelligence (AI) fraud detection systems could complement or even enhance the proposed 72-hour measures by offering a more proactive approach to identifying threats. AI systems excel at analysing vast amounts of data in real-time, detecting patterns of fraudulent behaviour, and flagging suspicious transactions with greater precision than traditional methods.

This could reduce false positives, minimising inconvenience for legitimate users while increasing the likelihood of catching actual fraud.

AI can assess risks in milliseconds, allowing most legitimate transactions to proceed without delay, while machine learning models can adapt to evolving fraud tactics by identifying anomalies and new scam trends that manual systems might miss. AI can also handle a high volume of transactions, making it particularly effective for large financial institutions with millions of users.

Rather than choosing between AI and payment delays, a hybrid system might be the best solution. AI can act as the first layer of defence, identifying and blocking the majority of fraudulent attempts before they reach users. In rare cases where uncertainty remains, the ability to delay and manually review high-risk transactions can serve as a valuable backstop. This combination could provide both robust security and a seamless user experience.

The 72-hour payment delay might seem like a minor inconvenience, but its cumulative impact on businesses and consumers could prove significant. For businesses, it means potentially delayed cash flow, operational hurdles, and lost opportunities for growth. For consumers, it could translate into frustration and disrupted financial planning. We need to ask ourselves: in today's fast-paced economy, is waiting three days for a payment to clear acceptable?