Finextra quotes Caroline Greenwell on the newly introduced APP fraud reimbursement scheme

The Authorised Push Payment (APP) victim reimbursement scheme comes into effect today under rules from the Payment Systems Regulator (PSR). Payment service providers (PSPs) are now required to reimburse victims of APP fraud, up to £85,000, split evenly between the sending and receiving PSP.

Reimbursement is likely great news for many consumers, however, for banks and financial institutions this will only increase the pressure to ensure they are taking as many steps as possible to prevent scams reaching the finish line.

Caroline Greenwell, Partner, flags that there could be unintended consequences of the new regime:

The mandatory compensation could pave the way for more fraudulent schemes, potentially of a more sophisticated nature, with fake victims of fraud colluding with the fraudster who receives the money in the ‘scam’.  Payment providers must therefore focus on their prevention and detection mechanisms, as well as on their obligations to customers under the regime.

Despite the cap being lowered to £85,000, it is still likely to affect smaller banks and companies disproportionately.

She adds:

Smaller institutions will not necessarily be able to afford to pay compensation where customers have been careless and will probably apply greater scrutiny to the customer’s conduct. It is therefore possible that the gap will widen between large and small banks in how they handle APP fraud, and we may even see smaller outfits allowing claims to be brought in front of the courts where they maintain that the customer’s conduct does not meet the standard required. The new regime could, despite its objective to the contrary, lead to more civil claims.

Read the full piece in Finextra here.