APP Scams continue to grow, and we appreciate the PSR is committed to doing more to protect consumers. Nonetheless, we do not believe that measures such as requiring mandatory reimbursement will effectively prevent fraudsters from acting, rather we believe this could create the opposite effect. Whilst the implementation of these measures do provide additional protection for consumers, we highlight four main areas of concern:
- Friction: the proposals will slow down the Faster Payment Scheme (FPS) for some payments and this could cause customers to stop using it. Instead, they could revert to using cheques and cash; further, whereas the current EU proposals on the widespread adoption of instant payments are likely to be adopted soon, these proposals take the customer experience in the opposite direction – towards slower or delayed payments.
- Education of payment users: educating customers to be careful should be at the core of this approach rather than adjacent to it.
- Increase in first party fraud: because most people will be reimbursed from what are claimed to be fraudulent transfers, fraudsters will target consumers and reward them for claiming reimbursement of a transaction that can then be claimed as being fraudulent. This is fraud by both the payer and the fraudster. This could have the unintended consequence of indirectly incentivising consumers to be party to the fraud.
- Reduced competition: if all firms will have to reimburse consumers for all APP fraud, the relative burden on smaller firms will be greater. This runs contrary to PSD2 and the goal of opening up the market.
We recommend that anyone who is concerned about the prosperity and viability of the payments industry reads the responses that we submitted to the Payments System Regulator today.
With special thanks to:
• Aoife Hurley, Chief Strategy and Partnership Officer, PPS
• Erik Vasaasen, CTO, Okay
• Fabien Ignaccolo, CEO, Okay
• Ingvar Ülpre, UK General Counsel, LHV
• Jane Barber, Regulatory and Trade Association Lead – Payments, NatWest Group
• Jeremy Evans, Regulatory Change Manager, Modulr
• Julian Brand, Chief Lead and Compliance Officer, PPS
• Marco Magalhaes, Senior Product Manager, Form3
• Nick Fleetwood, Head of Data Services, Form3
• Other members who have preferred not to be listed, as their companies have decided not to respond to this consultation, but have expressed personal views on this topic.