The UK Treasury and the Financial Conduct Authority (FCA) have voiced concerns regarding an impending fraud refund scheme that could pose significant challenges to the financial sector, according to a report by CityA.M.
Set to be implemented by the Payment Systems Regulator (PSR) on October 7th, the new regulations will require banks and fintech companies to fully reimburse victims of authorized push payment (APP) fraud, with compensation capped at £415,000. The cost of reimbursement is to be shared between the sending and receiving firms.
Potential Industry Impact
While the scheme is designed to protect consumers, particularly in light of the nearly £460 million lost to APP fraud in the UK last year, there are growing concerns about its potential impact on the financial industry, especially on smaller firms. The tight timeline for implementing these rules has raised alarms within the sector, with fears that it could cause long-term harm.
Sources indicate that Labour City Minister Tulip Siddiq and Chancellor Rachel Reeves have expressed reservations about the October deadline, suggesting that the timeframe may be too short for the effective implementation of the scheme.
The new rules demand that all parties involved in the payment process, including approximately 1,500 payment firms, comply with a strict five-day window for reimbursing fraud victims. This has led to concerns that many firms may struggle to efficiently use the claims management system intended for this purpose, potentially forcing them to rely on manual processes. Such a move could complicate communication between companies and delay payments to those affected by fraud.
Industry Skepticism
Pay.UK, the organization responsible for developing the system, asserts that it will be ready by the deadline. However, skepticism remains high within the industry, with fears that the scheme may prove too costly for smaller players, potentially stifling investment in the UK’s fintech sector.
As the October 7th deadline approaches, the financial sector is bracing for potential difficulties arising from the new PSR rules. The concerns raised by the Treasury, combined with industry warnings, suggest that the scheme could encounter significant hurdles during its initial rollout.
Silvija Krupena, Director of the Financial Intelligence Unit at RedCompass Labs, commented on the situation, saying, “The regulator’s consideration of delaying or modifying the threshold for the new reimbursement scheme indicates that these rules may not be fully robust. It’s crucial that the industry’s concerns are heard.”
Krupena further explained, “While the intention is to assist scam victims, merely reimbursing losses does not address the root cause of the problem. A more comprehensive approach is needed, one that involves not only financial institutions but also tech and social media companies.”
Last month, the FCA introduced new rules aimed at establishing a streamlined listings regime in the UK, with a single category and enhanced eligibility criteria for companies seeking to list their shares. These changes are part of an effort to align the UK’s listing standards more closely with international practices.
