Oct. 7, 2024, saw the UK introduce mandatory reimbursement for authorised push payment (APP) fraud. Five months later, and last year’s predictions of chaos and the total collapse of the fintech sector have not come to pass.
In a recent treasury committee hearing, David Geale, interim managing director of the PSR, shared key insights on the implementation and future of APP fraud reimbursement.
His appearance at the treasury committee came hot on the heels of a recent announcement that the Starmer government intends to merge the PSR into the Financial Conduct Authority (FCA).
Unsurprisingly, the merger decision has led commentators to question what this means for the future regulation of payments, particularly its landmark reimbursement policy.
Geale’s appearance in front of the committee provided him the opportunity to emphasise that the policy is designed to create better incentives for banks and payment service providers (PSPs) to implement stronger fraud prevention measures.
“By ensuring that the burden does not fall on the consumer, we expect banks to take a more proactive role in fraud prevention,” Geale said.
Pressure on banks
A critical element of the new policy is that it creates incentives for banks to invest in better fraud and financial crime detection. In his remarks, Geale stressed that financial institutions can no longer rely on outdated security measures. Instead, they must adopt advanced analytics, AI-driven monitoring, and cross-bank collaboration to detect suspicious transactions before they occur.
The role of the receiving banks is under particular scrutiny. Fraudsters often move stolen funds quickly through networks of mule accounts to launder the proceeds of their crimes. Geale emphasized that banks facilitating such transactions must be held accountable: “The accountability does not just lie with the bank sending the money,” he said. “The receiving institution has a crucial role in preventing fraud as well.”
Positive indicators
In 2023, a mere 65% of consumers were reimbursed under the voluntary contingent reimbursement model (CRM). In his treasury committee appearance, Geal pointed out: In the first four months of the new regulation, customers filed 44,000 reimbursement claims – just 21% of the 2023 total and a 1/3 decline in claim volume.
Crucially, Geale also shared that payment service providers (PSPs) sought to assert the customer’s failure to adhere to the Consumer Standard of Caution in just 1% of cases.
He also highlighted that around 21% of claimants were considered vulnerable by their PSP and consequently reimbursed immediately. In stark contrast to the CRM, 96% of in-scope claims were settled within the regulatory timeframe.
Geale also clarified that the profile of cases by value, which allowed the PSR to justify a reduction in the claim limit to £85K, has remained unchanged, with a limit of £85K capturing 99% of claims by volume and 90% by value.
Geale also highlighted that, regardless of the new regulation, consumers retained the right to seek further recourse via the Financial Ombudsman Service (FoS).
In 2023, 411 out of 250,000 cases surpassed £85K. Geale revealed that the first four months of mandatory reimbursement saw only 79 cases valued at more than £85K, which equates to less than 1% of the cases reported. Those 79 cases were associated with a loss of £9.3M of which £6.2M was reimbursed.
Regardless of your opinion on the reimbursement limit, the PSR has committed to undertaking an independent review in October 2025. Geale also made it clear that the review could result in the reimbursement limit increasing or decreasing. It seems unlikely, however, that the PSR would seek to adopt a limit that doesn’t result in most claims being met by volume and value.
The next seven months
Despite uncertainties surrounding the PSR’s future, one thing remains clear: The fight against APP fraud is far from over. Mandatory reimbursement represents a significant step forward in consumer protection in the UK, but the regulation will only be considered a success if losses fall because of banks deploying better fraud-detection tools.
Geale’s comments indicate that while challenges remain, the fundamental principles of protecting consumers and holding financial institutions accountable will remain central to the UK’s regulatory efforts.
As the FCA prepares to absorb the PSR, all eyes will be on how it handles the APP fraud reimbursement framework. It is clear from the treasury committee that parliamentarians expect regulators to remain committed to consumer protection, ensuring that fraud victims – many of whom will also be constituents – do not once again, suffer the financial burden of fraud crime.
