U.K. banks will split the reimbursement cost for customers who fall victim to authorized push payment (APP) scams, according to a new policy released by the U.K.’s Payment Systems Regulator.
The aim is to incentivize the payment industry to invest in fraud prevention and enhance customer protection. The implementation deadline for the new reimbursement program is set for the first quarter of 2024. The regulator hopes that by holding both sending and receiving banks accountable, they will strengthen controls to prevent APP scams from occurring.
APP scams have been on the rise as real-time payment systems gain popularity worldwide. The report highlights that 97% of APP scams in the U.K. occur on the Faster Payments Service. As real-time payments are expected to account for a significant portion of electronic payments globally by 2026, combating APP scams becomes crucial for maintaining confidence in these systems and maximizing their economic benefits.
While the effectiveness of penalizing banks in reducing APP scams remains uncertain, the Payment Systems Regulator emphasizes the need for an ecosystem-level approach. Financial institutions must ensure secure authorization of payments across different channels to deter fraudsters.
The regulator expects the new reimbursement policy, which splits reimbursement 50-50 between sending and receiving banks, to drive innovation and effective interventions to change customer behavior.
The U.K.’s reimbursement policy excludes certain types of payments, including those made across other payment systems, international payments, payments for unlawful purposes, and civil disputes.
By implementing these policies, the regulator aims to build consumer confidence in faster payment platforms and gradually reduce APP scams, although it anticipates an initial increase in fraud cases.
