The financial industry is on the verge of a transformative change with the upcoming reimbursement requirement for Authorised Push Payment (APP) scams, as set out in the June 2023 Policy Paper by PSR. In this comprehensive breakdown, we will explore the specifics of the policy, including who is in scope, limits, exceptions, time limits, and delve into our perspective on potential risks and considerations.
Policy Specifics
- Who is in Scope: The reimbursement requirement primarily targets Payment Service Providers (PSPs) operating within the Faster Payments system in the UK. High-street banks, building societies, EMI’s and smaller payment firms are in scope. This includes both sending and receiving PSPs engaged in Faster Payments, including payment initiation service (PIS) transactions.
- Limits: The policy paper in June 2023 did not specify a maximum reimbursement limit for APP fraud claims. There will be a maximum limit and PSP will consult on the appropriate maximum value for APP fraud claims.
- Excess: Sending PSPs will have the option to apply a claim excess under the new reimbursement requirement. PSR will consult on the appropriate level ahead of Q4, 2023.
- Exceptions: The new reimbursement requirements do not extend to payments made across other payment systems, international payments, payments for unlawful purposes, or civil disputes. Civil disputes, where the customer has not been deceived, are excluded from the definition of APP fraud.
Reimbursement Framework Enhancements
- Reimbursement Cost Sharing: Introducing a significant change, receiving PSPs are now obligated to reimburse sending PSPs with 50% of the reimbursement initially paid to the customer. Pay.UK will establish a defined time period for this process, reinforced by an ultimate backstop to ensure the timely reimbursement by receiving PSPs.
- Time Limit Extension: Under the new reimbursement requirement, sending PSPs are mandated to reimburse customers within five business days, a pragmatic extension from the initially proposed 48-hour time limit. This adjustment recognizes the operational intricacies involved in ensuring efficient and prompt reimbursement.
- Claim Excess Consultation: Sending PSPs now have the option to apply a claim excess, offering flexibility in the reimbursement process. A consultation process will determine the appropriate level for this excess, with details published in PSR guidance in Q4 2023.
- Time Limit to Claim: Sending PSPs retain the option to deny APP fraud claims submitted more than 13 months after the final payment to the fraudster, providing a defined timeframe for claim submissions.
PSR’s Action Against APP Fraud
- Balanced Scorecard: The PSR is taking a proactive stance by publishing a balanced scorecard of APP fraud data. This transparent approach holds PSPs accountable for their performance in handling APP fraud. Customers are empowered with information, allowing them to make informed choices about their banking providers.
- Intelligence Sharing: The initiative to enhance data and intelligence sharing through the development of Enhanced Fraud Data (EFD) is a crucial step in improving fraud prevention. This collaborative effort, supported by Pay.UK and UK Finance, aims to create a standardised system for sharing customer data, thereby significantly enhancing fraud detection capabilities.
- Confirmation of Payee (CoP) Expansion: The expansion of CoP, a name-checking service for UK-based payments, is another strategic measure. This initiative, directed at 400 new PSPs, will contribute to reducing accidentally misdirected payments and APP fraud, especially in cases of impersonation scams
As the financial industry gears up for the June 2023 policy implementation, a thorough understanding of the policy specifics, potential risks, and the multifaceted approach by the PSR is essential. Collaborative efforts, proactive measures, and a commitment to consumer protection will be pivotal in the successful execution of this comprehensive approach to combat APP fraud.