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The Payment Systems Regulator (PSR) appears to have bowed to industry pressure over its incoming authorised push payment (APP) fraud reimbursement rules — keeping the date the same but significantly reducing the cap for reimbursement from £415,000 to £85,000.
The PSR announced a proposal to introduce a new cap on reimbursement for victims of APP fraud, aiming to align it with the Financial Services Compensation Scheme (FSCS) limit of £85,000.
This move, currently under consultation, seeks to enhance consumer protection while ensuring the financial sector remains committed to preventing fraud.
If approved, the new cap would replace the existing maximum reimbursement value of £415,000, which was in line with the Financial Ombudsman Service’s limit at the time it was established.
Despite the reduction, the PSR has insisted that over 99 percent of APP fraud claims, by volume, would still be fully covered under the proposed cap.
“We listened to concerns about the reimbursement limit and committed to collecting more evidence to inform our approach,” said David Geale, the PSR’s managing director. “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.”
Geale continued that despite the climbdown, consumers in the UK will still receive world-leading protection, and payment providers will still be heavily incentivised to improve anti-fraud protections. “We maintain effective market competition and innovation.”
The move has been positively received in the payments industry so far, with Alex Reddish, managing director of Tribe Payments, saying that it is “a positive step towards safeguarding the growth of the UK fintech industry”.
“By addressing this issue, the PSR is not only enhancing the security framework but also supporting the broader financial ecosystem.”
Reddish continued that while it’s crucial to tackle the underlying problem of fraud, which cost the industry nearly £5bn in 2023, balancing these measures with the need to nurture and sustain the fintech sector is equally important. “This move signals a commitment to both innovation and security, ensuring that the UK remains a global leader in financial technology while actively working to mitigate the impacts of fraud.”
Meanwhile, Dima Kats, CEO and founder of Clear Junction, said that he was “highly supportive of the ongoing dialogue between the industry and regulators”.
“The concerns raised across the industry about the potential impact of the new regime have clearly been acknowledged,” he said.
While Kats pointed out that the new threshold of £85,000 remains high, “it’s reassuring to see that feedback is being heard and considered”.
“This move strikes a better balance between protecting consumers and ensuring the continued innovation and competitiveness of the financial sector.”
What drove this change?
The decision to review the cap follows the PSR's analysis of APP fraud cases, which found that out of more than 250,000 cases in 2023, only 18 involved losses exceeding £415,000, and 411 involved losses over £85,000.
The review also highlighted that high-value scams often consist of multiple smaller transactions, reducing the effectiveness of transaction limits as a fraud management tool.
“It is our view that this proposed approach will ensure that we and the industry can deliver timely and effective consumer protections from Faster Payments APP scams, which would address the vast majority of APP scams experienced by consumers, while mitigating concerns we have heard about the potential risks and impacts of our original approach to start the maximum level of reimbursement at £415,000 per Faster Payments APP scams claim,” the PSR says in its consultation.
The cap has been consistently unpopular with the payments industry. During the summer payments lobby group the Payments Association pushed for the cap to be delayed by a year, and also called on Tulip Siddiq, the newly appointed economic secretary to the Treasury and City minister, to reduce the mandatory reimbursement cap fraud to £30,000.
The backlash is also thought to have triggered the exit of the PSR’s managing director, Chris Hemsley, back in June.
Although the new cap represents a shift in consumer protection, the PSR emphasises that it will not weaken the overall strength of the UK's fraud prevention framework.
The regulator is committed to ensuring that payment service providers (PSPs) meet their obligations and that victims of APP fraud are reimbursed promptly and fairly.
The PSR’s proposed cap and other fraud prevention measures are set to take effect on October 7.
Pay.UK, which operates the Faster Payments system, has confirmed that it will be ready to implement the new protections by this date.
The consultation on the proposed cap will close on September 18, and the PSR is expected to finalise its approach by the end of September, ensuring that the new measures are in place as scheduled.
