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During a bittersweet hearing with the UK’s Treasury Select Committee, the head of the Payment Systems Regulator (PSR) endorsed the idea of social media platforms playing a bigger role in fraud reimbursement.
The appearance of David Geale, the PSR’s interim managing director, alongside PSR chair Aidene Walsh, came as members of parliament (MPs) scrutinised the government’s decision to abolish the regulator.
The announcement regarding the PSR’s shutdown coincided with a public hearing in parliament, in which Treasury Select Committee chair Dame Meg Hillier appeared shocked that the regulator and its 185 staff only found out its fate on the same day as everyone else.
When asked if he was aware that the abolishment of the PSR was coming when he took on the role from Chris Hemsley last year, Geale denied any such knowledge.
APP fraud rules
The select committee discussed the topic of authorised push payment (APP) fraud during the hearing, with Walsh saying its “really reassuring seeing the information come through in terms of the positive impact being had”.
Geale conceded that it is still “early days”, but that there has been a reduction between early 2023 and the first four months of implementation for claims being made.
Dame Harriett Baldwin, a Conservative and former chair of the committee, praised the PSR for not conceding to pressure on the policy.
“Thank you, as you did have a lot of people trying to slow you down, and have this not rolled out,” the former Treasury minister said.
“This has had a really beneficial impact on our constituents who are being scammed and a really beneficial impact in terms of their economic wellbeing.”
“The UK is very much at the cutting edge of payments,” she said, stating that consumers have seen improvements due to this work.
Geale noted that the fintech sector continues to lobby for a smaller limit than the £85,000 reimbursement cap that is in place, although the “noise abated a bit” when the policy went live.
Fraud origination
Geale also said that more could be done regarding online platforms' approach to fraud to “both change the incentives on platforms and indeed to put fraud prevention measures in place”.
In response to MP Yuan Yang, who asked which regulator should be looking at this matter, he said that the UK’s fraud taskforce is the place to take action forward.
“People talk about what can be done and if there should be a levy, but I’m not sure that makes much difference, so I think it has got to be about practical steps about what can be done to prevent these fraudulent invitations, if you like, actually happening in the first place.”
He said he was “not sure” who is the best regulator to do that, but said that current measures, which fall entirely on payment service providers (PSPs), are “blunt but necessary”.
However, he was open-minded about the possibility of this changing: “I would love to get to a world where we could say fraud originated here, and if you are responsible for enabling that then you should have to pay something towards it.”
“It is very complex to be able to consider where did this start and has it gone through a number of steps.”
“I think we are a way away from doing it, but would I like us to get there someday? Yes, I would.”
What the future looks like for the PSR
When further probed by Hillier, a Labour MP, who asked whether he might have had “a hint” when his role was merged with the payments and digital assets lead at the FCA, Geale maintained that he had no advance knowledge of the government’s plans.
PSR chair Walsh said that the board of the PSR had not offered up the FCA merger as an opportunity, and said that the regulator had been “absolutely clear” that it would be able to “keep up” with changes in the payments industry.
However, she did acknowledge that the regulator had pushed for ways to become more efficient.
She added that although the PSR has done a lot to be proud of, Joe Garner’s Future of Payments report and the subsequent National Payments Vision “both alerted us to the fact that there was a view that there was a lot of regulatory congestion in payments”.
Walsh was also pushed on the APP fraud policy, which Hillier praised as a win for constituents, but said seemed to have played against the regulator in the decision made by the government. Walsh declined to comment.
“The PSR was set up ten years ago, and it is fair to say that payments has moved on tremendously in the last ten years.”
She continued that it is “incumbent on all of us” to look at what makes sense now.
Work to continue?
Labour MP John Grady asked whether abolishing the PSR meant that work undertaken by the regulator would be done away with, resulting in less protection for consumers.
However, Walsh insisted that plans set out in the regulator’s latest strategy are set to continue.
“Our powers to support … would be transferred to the FCA,” she said.
Meanwhile, Geale said that the expectation is that everybody will move across to the FCA, meaning that a reduction in headcount may not be on the cards for the regulator as it goes through the merger.
The caveat to this, he continued, is whether all staff move to the FCA or whether some move to other regulators that are taking on the PSR’s mandate once it is wound down.
Geale also said it is “vitally important” that the regulatory oversight of payment systems remains, given that the FCA is not tasked with this already.
Putting a positive spin on the situation, Geale said that the joining up with the FCA will mean that the regulator will be able to keep a close eye right across the payments ecosystem.
“The decision-making will be quicker, as we don’t have to go through two different boards for it, and we have got an opportunity to focus and target in the ecosystem."
