PSR to cut APP reimbursement limit to £85,000

"Citing people briefed on the plan, The FT reports that the regulataor [sic] was forced to push down reimbursement levels amid fears that the new rules could put many smaller fintechs out of business."

Let them go.  if they can't keep customers safe, or reimburse them when they fail, they shouldn't be writing the business. Leave it to the bigger fish (or better firms). Or lower their own transaction limits.

A small vocal minority of lobbyists should not be dictating regualtory policy designed to keep customers safe (and incentivise FIs to do more to prevent economic crime for the benefit of society at large) for the sake of a few niche players.

This is just a side issue...... re-arranging the deck-chairs on the sinking Titanic perhaps?

Until the parties that are causing the losses become the ones that are HELD LIABLE, then the losses will continue........

The main issue is that fraudsters lie and cheat people to make payments to them rather than to intended recipients. We can try and teach people NOT to be cheated, and we are not going to stop the fraudsters. BUT, we can make it harder for the fraudsters to get bank accounts and to move the money. How?

From the statistics produced by the industry reporting: it is a small number of payments companies that allow the fraudsters to open accounts and receive the money and then pass on the payments elsewhere. So the losses need to be paid by the RECEIVING banks that (in the main) breach AML/CTF law !! - when they:

a) Open accounts for fraudsters that they have not identified properly or with fake or inadequate identification
b) Quickly receive a large sum(s) of money into these accounts that they will have inadequate processes to understand the nature of the payments; and which they then pass-on to other accounts.

The industry reporting *** (sadly) shows that there are common offenders that process these frauds 1000s of times more often commensurate with their size. These are generally the small financial institutions that have not yet learned to do what they should do. And in talking to many of these organisations: the stance is often akin to: "we are not establish/big enough to compete with the big banks and comply with all these identification requirements that the law requires of us".

If the losses that they cause are passed-on to the offending organisations: then they will quickly find ways to stop the fraudsters that they are helping today, and recover more of the funds from the fraudsters and banks that the money subsequently goes on to. This is the only way that delivers success and until we use these traditional 'follow the money' disciplines: the losses will continue.

*** PSR - Authorised push payment (APP) scams performance report - July 2024 

Reimbursing fraud victims is important but the metrics in the latest PSR scams report show clearly that APP fraud increases with reimbursement. If the 'victim' is an accomplice to the fraud it is very difficult to detect, while mandatory reimbursement provides an easy route to defraud banks in this way. 

Mandatory reimbursement may have the effect of forcing banks and PSPs to invest more in preventing APP fraud, but it is likely to lead to banks delaying or even suspending legitimate payments, intruding on customer privacy and impeding open banking payments.

It is surprising that the PSR has no measures in place to prevent reimbursement from being used to defraud banks and to prevent customer inconvenience. It is even more surprising that the government is doing nothing about the blatant scams on social media where 80% of APP fraud originates.

The apparent demands for a lower limit are nothing more than a distraction. It potentially protects receiving firms, but does not remove the opportunity for customers to seek recourse via the FOS.

As the consultation observes the cost of compensation then falls on the sending firm and there is scope for up to £430K to be reimbursed. 

It will be interesting to see how some of the firms that have pressed for this change will react when they're the sender and the FOS rules against them based on a control failure. 

If we're victim-centric we will reject this change and embrace the current £415K limit as to do otherwise forces victims of high-value APP (who are few) to seek recourse via the FOS.

It is unethical friction, deployed on the demands of a few vocal PSPs who hope to delay the inevitable recognition that their performance in respect of financial crime is poor. 

Reimbursing victims tackles the symptoms but more needs to be done to tackle the root causes: social media being a playground for fraudsters and Financial Institutions allowing such dodgy funds to enter their accounts.

Yes: the adage of addressing root causes generally works.  But I have no idea how social media allows dodgy funds to enter the system. Equally, if social media can't be 'addressed' for child abuse and human-trafficking ......

The solution rests in making those that cause the problem pay:  I.e. the fraudsters and those banks that collude with them to open bank account for them.  

£0 is the correct amount. With some more lobbying by banks, I'm sure it will come down to that figure. APP Scam is caused by gross negligence of payor. Let them be held liable for the full amount, including, but not limited, to £415,000 or £85,000. OTOH, if unscrupulous payor-payee scammers engage in first party fraud, as it happens frequently in credit card payments, scammed banks should be reimbursed the full amount, without any cap at £415,000.

Meanwhile, until the reimbursable limit touches £0, banks will hold up payments under the pretense of having to do more scrutiny to prevent APP Scam, earn more float, and totally defeat the purpose of Faster Payments.  

@Ketharaman Swaminathan - This is simply not the way that banking or consumer law operates in the UK, or at the UK regulators. Maybe in India (I do not know)! "Make the victim pay" - is cold, and encourages fraud. In risk management, one has to 'follow the money' and make the perpetrators of the fraud pay - and the people (receiving banks that have aided the fraudsters) through their negligence and non-compliance with AML/CTF law - should be the people that suffer the losses when the fraudsters cannot be found and the money returned. It is their responsibity to understand the nature of the funds that they pass to fraudsters.  

@BillTrueman: (1) Feel free to show your jingoism by dragging India into the picture unnecessarily but that won't stop you from displaying your ignorance about what's happening in UK: British courts have ruled that APP scams are caused by gross negligence of payors and tossed out demands for reimbursement by banks. (2) It's a fraud commited by payee on payor, not by bank, payor can seek redress from law enforcement but it's not banks' job to reimburse. At least that's how civilized societies work - when B defrauds A, they tell cops to nail B, they don't tell C to compensate A. (3) If payee bank has broken the law in opening account for scammer payee, there are provisions in the law to penalize the said bank, they should be invoked without waiting for a scam to happen.

@Ketharaman Swaminathan - same answer.  The argument does not change, and no precedence is set based upon the minority of cases. Imposing your values, does NOT make the reality change.