The Payment Systems Regulator (PSR) has proposed that banks and other payment firms participating in CHAPS reimburse their customers who have been victims of authorised push payment (APP) scams. The PSR’s direction will underpin the Bank of England’s new CHAPS reimbursement rules. The PSR  expects to finalise and publish its specific direction in September 2024. The PSR is proposing 7 October as the go-live date.

30 members of the Payments Association have now sent a letter pushing back against the proposals. It is argued that many banks and payment firms cannot afford to reimburse victims. It is also claimed that as most scams happen on social media platforms, these firms should be held to account.

Silvija Krupena, Director, Financial Intelligence Unit at RedCompass Labs argues that banks should focus on investing in new anti-fraud technologies. These can flag suspicious transactions and prevent scams from happening in the first place.

PSR rules pile more pressure on banks and payment providers

Krupena said: “It’s no surprise to see UK challenger banks and payment firms push back on the PSR’s fraud victim refund plan. Many simply can’t afford to do it. They have already made huge investments into fraud prevention. Adopting tools such as confirmation of payee which helped banks stop £650.7m worth of fraud in the first half of 2023.

“These new rules will pile even more pressure on banks and payment providers in what is already a challenging time for the industry. Liability has shifted from consumers onto banks. They clearly have an important role, but we can’t ignore where the majority of fraud originates. A scam often begins with a simple message on social media platforms, which rake in billions of dollars in profits each year. So, it’s equally important we hold these firms to account.

Banks need to take preventative action

“To win the fight against fraud, banks need to take preventative action. They need to focus their investment on exploring new technologies such as AI and data-driven, persona-based approaches, which can flag suspicious transactions and stop them before it’s too late. This will potentially save hundreds of millions of pounds from being stolen. Most importantly, it will protect more people from having their savings stolen and lives turned upside down by fraudsters.”

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