Payments Association calls for lower fraud reimbursement to boost fintech innovation

The Payments Association has recently urged the new UK Economic Secretary to the Treasury, Tulip Siddiq, to reduce the mandatory reimbursement for Authorised Push Payment (APP) fraud from £415,000 to £30,000.

This request is driven by concerns that the current high threshold hampers competition, stifles innovation, and may force smaller firms to exit the market. The association argues that a more proportionate threshold would better reflect average losses and support a healthier competitive environment.

The Payment Systems Regulators (PSR) policy, which mandates reimbursement for APP fraud victims, is set to take effect in October 2024. The Payments Association has voiced concerns that these rules could “undermine competition, stifle innovation, reduce investment, and force smaller players to a disorderly exit from the UK.” The association also highlights the potential for increased de-banking, particularly among vulnerable and underbanked consumers.

Riccardo Tordera, director of policy at the Payments Association, emphasised the need for regulatory change, stating, “Fintech is the future of financial services and we are ready to play our part to contribute to the growth agenda. But we need to see the regulatory change we have been requesting for months. Good regulation allows responsible risk-taking which, in turn, drives good behaviours. I remain convinced that this is the only way to deliver sustainable growth.”

The call for a Tech Levy

In addition to the reimbursement threshold reduction, the Payments Association has called for a ‘Tech Levy’ on social media companies to combat fraud. This levy would hold tech giants accountable for the impact of payments fraud originating from their platforms.

Tony Craddock, director general of The Payments Association, stated, “We welcome the news reported on Friday 28th June that Labour has drafted plans to make tech companies liable to reimburse victims of online fraud, in a departure from controversial rules.”

Craddock also stressed the need for coordinated anti-fraud measures, suggesting the appointment of a dedicated Minister to oversee cross-departmental actions. “Fraud is an issue that impacts every department of state, but as there is no obvious departmental lead. It is everybody’s problem and nobody’s priority. Hence, we would welcome the appointment of a dedicated Minister to coordinate cross-departmental actions. It is critical that anti-fraud measures are tackled in the round, with all parties bearing some responsibility: government, law enforcement, payments providers, retail, the technology sector and consumers.”

The Payments Association’s recommendations include a phased approach to implementing the reimbursement scheme, with regular reviews every six months to assess its impact on economic growth, competition, innovation, and fraud levels. The association remains optimistic that these changes will foster a more innovative and competitive fintech landscape, ultimately benefiting consumers and the broader economy.

As Tordera concluded, “The expectation for the new government to show strong leadership is higher than ever. It’s time to deliver growth, and not just talk about it.”

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