The Payment Systems Regulator (PSR) is consulting on a new cap for its upcoming APP reimbursement scheme, which comes into force in October.

The UK payments watchdog previously set the maximum reimbursement value at £415,000, which will now likely be reduced to £85,000.

The move comes after industry sources recently told City AM that they expected there could be a U-turn on the regulator’s rules, including a potential delay to the launch date of the scheme or the reimbursement threshold.

While the PSR is exploring a lower threshold, it has stood firm on its pledge to introduce the mandatory initiative on 7 October this year.

Pay.UK, which operates the Faster Payments system to which the protections apply and through which most APP fraud flows, has confirmed it will be ready for the deadline.

The PSR's managing director said that the proposed threshold change comes after the organisation listened to industry concerns about the reimbursement limit and has since committed to collect more evidence to inform its approach to the scheme.

“As a result, we are now consulting on a limit that still covers the vast majority of authorised push payment scams and strikes the right balance,” continued David Geale. “Under our proposals, consumers in the UK will still receive world-leading protection, payment providers will still be heavily incentivised to improve anti-fraud protections and we maintain effective market competition and innovation.”

Innovate Finance, the independent industry body for UK FinTech, welcomed the update but added that the PSR needs to address concerns about "implementation readiness", particularly in relation to claims handling and disputes, as well as payments being disrupted.

"This is positive news for consumers and for the competitiveness of UK FinTech," commented Innovate Finance chief executive Janine Hirt. "As we at Innovate Finance have consistently lobbied for, a maximum reimbursement of £85,000 will cover in full 99.7 per cent of all payments fraud and will provide the same level of protection as bank deposits, whilst reducing payment firms’ exposure to the risk of fraudsters themselves exploiting the new rules."

When the PSR first published its requirements for payment firms to reimburse APP scams victims in December 2023, it committed to consider high value APP fraud claims and publish the findings.

Its review found that – out of over 250,000 cases - there were 18 instances in 2023 of people being scammed for more than £415,000, and 411 instances of more than £85,000.

According to the organisation, its analysis found that almost all high value scams are made up of multiple smaller transactions, reducing the effectiveness of transaction limits as a tool to manage exposure.

A welcome change

Dima Kats, chief executive and founder of global payments provider Clear Junction said that the firm is highly supportive of the proposed changes to the cap.

"While the new threshold of £85,000 remains high, it’s reassuring to see that feedback is being heard and considered," continued Kats. "This move strikes a better balance between protecting consumers and ensuring the continued innovation and competitiveness of the financial sector."

Alex Reddish, managing director of digital payments and infrastructure company Tribe Payments, agreed that the move signals a commitment to both "innovation and security".

Concerns about a lack of responsibility

While many across the industry welcomed the news, fraud and security specialist Dan McLoughlin, who works for AI fraud platform Lynx, said that the logic previous high-value cap on reimbursement was clear.

"By setting a substantial reimbursement limit, regulators clearly said to banks: “prevent fraud or be prepared to pay," he said. “Dropping the value of reimbursement so dramatically takes away a big part of banks’ financial motivation to prevent fraud.

"While most APP fraud cases will still be covered by the regulation, the dropping shows an unwillingness from banks to accept responsibility and make tough decisions. It takes away their drive to invest in robust fraud detection and prevention systems, which ultimately safeguard consumers."

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