The UK’s APP fraud reimbursement regime comes into force on Monday

This week marks a major change in the way UK banks and payment companies deal with fraud.

As of Monday (October 7), these organizations must do so compensate the victims of authorized push payments (APP) up to £85,000 ($111,000).

of Great Britain Payment Systems Regulatory Authority (PSR) had called for the refund rules after a spike in APP fraud, where someone is tricked into sending money from their bank account to a fraudster posing as a legitimate payee.

These scams are costing British residents $433 million in 2023says a PSR report published in August. This was 12% less than the previous year, although the number of fraud cases increased by the same amount.

The £85,000 amount is a new addition to the plan, with the PSR initially providing for a cap on Refunds of £415,000 ($544,000). Industry groups such as the Payments Association had lobbied the PSR to delay the introduction of the new measure for at least a year.

Riccardo Tordera-Ricchi, head of policy and government relations at the association, said in June that if the changes to APP fraud reimbursement go as planned, “the regulatory risk and requirements for participating in the UK payments market remain.” will increase significantly.”

“It will also lead to an increase in costs and friction in real-time payments, as well as a decrease in investment in the UK FinTech market due to higher risks of default and lower profitability,” Tordera-Ricchi added.

The reimbursement regulation remains controversial. The new regulation allows banks and payment companies, for example charge a fee of £100 in the regulation of fraud cases.

While many in the industry see the additional levy as a way to ensure consumers remain vigilant against APP scams, consumer groups have pushed back. They argue that 32% of APP fraud cases involve £100 or less, meaning many consumers would lose money if they were to receive a refund.

Meanwhile, tech companies are under pressure to play a bigger role in tackling APP fraud, with the UK payments and FinTech sector arguing that most scams originate on social media.

For example, after Meta announced last week that it was working on one with British banks MetroBank and NatWest Data exchange project To protect customers from fraud, a Revolut executive said these efforts “fall significantly short of what is needed to combat fraud globally.”

Woody Malouf, Revolut’s head of financial crime, argued that what Meta and the banks are doing amounts to “small steps” when what the industry really needs is big progress.

“These platforms share no Responsibility in compensating victimsand so they have no incentive to do anything about it,” he told CNBC. “A data sharing obligation, even if necessary, is simply not good enough.”