There has been a strong response in the UK against the PSR plan
Hundreds of financial firms are struggling to comply with the new UK regulation intended to curb online payment scams after having the worst summers for fraud.
Many industry participants voiced dissatisfaction with the final policy and consultation process, which contained a high refund ceiling. They also said they weren’t given enough time to get used to the new system.
But the regulator disagrees. In an email, Kate Fitzgerald, head of policy at the watchdog, stated that they have been extensively consulting on these measures for over two years and continue to engage closely with the industry to ensure timely and effective communication. She also mentioned that, in the long run, the watchdog would like to see businesses migrate to the new arrangement, which they have until Tuesday to register.
Ben Donaldson, managing director for economic crime at industry lobby group UK Finance, highlighted that the approach may exacerbate the issue, as prioritizing reimbursement over crime prevention could worsen the situation.
While authorities in other parts of Europe have been attempting to reach an agreement with banks over victim compensation and debating matters like the role of Big Tech and what constitutes gross negligence, this is the first attempt at a framework that could serve as a model for regulators worldwide. The PSR stated that its approach is to incentivize lenders and other payment firms to prevent crimes from happening in the first place while also consistently protecting the victims.
Some of the critics have been those who usually get more money declared fraudulently for every million pounds transacted. It is because the receiving firms were exempt from paying any refunds under the previous arrangement, but now, this is about to change, with a 50% reimbursement expected to come out of their funds.
According to a joint report by Miami-based global payments software maker ACI Worldwide Inc. and GlobalData, losses from APP scams are expected to reach almost $8 billion by 2028 across the six leading real-time payment markets of the US, UK, India, Brazil, Australia, and the United Arab Emirates. It represents a compound annual growth rate of 12% between 2023 and 2028.
However, there has been a strong response in the UK against the PSR plan.
The previous administration was persuaded by the vigorous lobbying of the industry, particularly against the planned refund cap and the perceived risk of moral hazard, to the extent that Chris Hemsley, the head of the PSR, resigned at the beginning of June.
Like many larger financial institutions, digital competitors such as ClearBank and Revolut Ltd. are pushing for Big Tech to take some of the responsibility, citing social media platforms as the primary source of fraud. Francesca Carlesi, CEO of Revolut UK, stated that while her organization is getting ready for the new regulations, they also want to ensure that fewer and fewer people in the UK are affected by fraud.
PayUK, the company tasked with establishing the communication infrastructure between sending and receiving banks to settle reimbursements, wouldn’t be able to onboard all 1,500 banks and businesses by the deadline of October 7. Some stated that the new and old systems will operate together in the interim.
According to a Pay.UK official, the system is ready and will have full functionality for in-scope payment service providers who require it by the October deadline. The current priority of the organization is to bring on board hundreds of companies with a history of fraud experience.
The goal of this new system is to regain victims’ trust in institutions. So, everyone must step up their game. However, there are still concerns about the hundreds of smaller businesses that aren’t prepared, according to IFX Payments Chief Compliance Officer Sara Cass has context menu.