MPs call for backdated APP fraud reimbursements and Faster Payments delays

Is it in everyone's best interests to impose a 24-hour delay on all first-time transactions, irrespective of the amount. What impact would this have on VocaLink's Pay by Bank app, and similar eCommerce initiatives?  I think the payee's bank should carry some of the risk, e.g. what is the history on the account (was it recently set up), is it receiving an unusually large number of payments, etc. and then those funds should be ringfenced incase of possible disputes. What kind of KYC was performed?

24h delay in FPS payments would slow down online ecommerce and bill payments, leading to a day's delay in shipment and due dates of utility payments etc. As far as I can see, we can live with that. However, such a delay would effectively kill the use of FPS-based payment methods for instore payments at supermarkets and other brick-and-mortar stores. 

Any delay in a payment is a terrible idea. It also removes almost all concepts of alternative payment rails, backed onto the FPS infrastructure. The impact on Open Banking future models is also highly impactful. In all, this is a terrible, ill thought out idea.

The solution is simple, which is to move to digital identities paying other digitial identities that can be verified by the banks or individuals themselves. This is now a very real possibility as Digital ID solutions are moving forward at scale. FATF itself is calling out digital ID and this is a perfect use case.

Digital ID would also empower real-time fraud detection systems, such as those delivered by leading edge companies as FeatureSpace. Thats real time fraud detection right now, avavilale to use, right now. Add in digital ID and the banking sector has a very powerful way of tackling payment fraud (not just push fraud for initial set up of a payment), without impacting the economy or killing massive potential in business models and open banking.

My final point is to focus in What Michael has said above. The crediting bank should have some form of duty of care here when receiving funds. Accounts that open up immediately and then have lots of payments coming in from a wide range of creditors should be raising alarm bells. If anything, this is where payments should be credited from, not the sending bank.

Delay is bad but the proposed move to delay first time payments by 24h is not as harebrained as it's made out to be.

We've waiting for digital identity like Samuel Beckett's protagonist was Waiting for Godot. Even if one existed, I doubt if it'd be any easier for the lay Payer to verify the digital identity of the Payee than it is to verify their real world identity. As we've seen, Confirmation of Payee is harder than first imagined and its implementation is delayed to next year. When I was involved in FPS implementation, I recall a scheme rule that said Receiving Bank would face a penalty if it failed to credit a payment to Payee's account within 2 hours (or was it 15 seconds?). So far there's no evidence that APP fraud involves a single account receiving multiple credits in a short while. Besides, there are several genuine businesses (e.g. events) where it's perfectly normal to receive multiple credits into an account in a short duration. Holding Receiving Bank responsible is not a solution. 

End of the day, APP fraud is caused by Payers being careless. Best solution is to educate them to be careful. Since such Payers constitute vote bank, lawmakers won't have the guts to tell them they won't get bailed out for their carelessness. Against that backdrop, delaying payments by 24h is perhaps the next best solution.