Banks, FinTechs, and payments companies in the UK struggle with new fraud rules. Bloomberg reports that they must meet the October 7 deadline to comply with regulations requiring reimbursement for victims of payment fraud. Unfortunately, many companies aren’t ready for the new refund system.
Some companies haven’t had enough time to adapt, and many are frustrated with the new refund policy. ClearBank CEO Charles McManus calls the process “sclerotic and ambiguous.”
The UK’s Payment Systems Regulator (PSR) disagrees. Kate Fitzgerald, head of policy at the PSR, says they have consulted extensively on these rules for over two years and are working closely with the industry to ensure smooth implementation.
The new rules hold both the sending and receiving institutions of a fraudulent payment responsible for reimbursing the victim. Refunds are capped at 415,000 pounds (about $541,000). Banks and payments companies must prove that the customer acted with gross negligence to reject a claim.
Earlier this year, the payments industry requested that the PSR delay these rules, but the regulator denied the request.
These rules target authorized push payment (APP) fraud, where scammers trick people into sending money to an account they control. APP fraud totaled nearly 341 million pounds (about $445 million) last year, marking a 12% decline from the previous year. However, fraud cases rose by 12%, increasing from 224,603 in 2022 to 252,636 in 2023.
David Geale, managing director of the PSR, reports progress with more victims receiving reimbursements compared to 2022. Yet, he notes that smaller firms still experience higher fraud rates compared to larger companies.