UK Banks Become World’s First to Reimburse Victims of Online Fraud
Tensions between tech companies and banks are rising over the growing issue of online fraud in the UK. According to CNBC, from 7th October 2024, banks in the UK will be required to compensate victims of online scams, known as authorized push payment (APP) fraud, with payouts of up to £85,000.
APP fraud occurs when scammers impersonate individuals or organizations, tricking people into making payments through online platforms.
New Rule Introduced by the Payment Systems Regulator (PSR)
The new scheme for the reimbursement of £85,000 has been rolled out by the Payment Systems Regulator (PSR) seeing the increase in cases of online scams. And, from Monday, 7th October, it intends to make it a mandate for all banks, fintech companies, and other payment platforms.
Launching one of the world’s first bank transfer fraud refund schemes, the UK has become the first nation to take the step for refunding the victims of online fraud schemes.
The UK Payment Systems Regulator (PSR) has set the APP fraud reimbursement cap at £85,000. While this might seem significant for many banks, it’s a reduction from the originally proposed £415,000.
Key Rules and Exceptions to the APP Fraud Compensation
Costs must be split between the sending and receiving companies, and most refunds must be processed within five working days. Firms can refuse a claim only if they can prove that the customer acted with “gross negligence.” These rules apply only to transactions involving UK accounts made after 7th October and do not cover earlier payments.
However, in case of any suspicion, the treasury said that it would give banks time to delay and investigate the claims if there is a reasonable ground for suspicion.
The firms are also allowed to charge £100 excess fees, which means that an online fraud scheme of less than £100 might not be reimbursed. Though this rule shall not apply to vulnerable customers or people who cannot afford it.
The PSR also claimed that these steps are being taken to protect citizens from scams and requested them to be more vigilant.
Fintech Companies’ Response to the New Mandate
With the new mandate being rolled out, several questions are being raised about whether fintech companies are bearing the brunt of it.
“These platforms share no responsibility in reimbursing victims, and so they have no incentive to do anything about it,” said Woody Malouf- the Head of Financial Crimes, Revolut.
META’s Role in Mitigating Online Fraud Schemes in UK
Seeing this effort from the UK government, META has teamed up with banks and financial institutions to help mitigate online fraud schemes in the UK.
META has asked for data related to scams from banks and payment portals so that it can train its system accordingly in identifying scammers and fraudsters globally.
