PSR wants to reduce the APP reimbursement limit to £85,000

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Citing people briefed on the plan, The said FT The regulator was reportedly forced to lower reimbursement levels amid concerns that the new rules could drive many smaller fintechs out of business.

Treasury insiders had described the proposed new rules, due to come into effect on October 7, as “a disaster waiting to happen” while calling for an even lower limit of £30,000.

A consultation on the new limit is expected shortly. The PSR said it would publish the results of its investigation into the extent of recent payments fraud involving individual transactions worth more than £85,000.

A lower threshold of £85,000 would bring the maximum protection amount in line with the Financial Services Compensation Scheme, which protects depositors when a bank goes bust.

The PSR said last month that there was wide variation between UK banks in the level of payment fraud cases they reimburse to their customers.

Some major banks such as Nationwide and TSB fully refunded more than 95 percent of lost funds last year, while others such as digital bank Monzo, Danske Bank and AIB gave their customers full refunds in less than 10 percent of reported cases.

The decline in PSR comes as fraud and fraud cases reported to the UK Financial Ombudsman Service reached a record high in the second quarter of the year, with APP fraud accounting for more than half. Between April and June 2024, consumers filed 8,734 complaints about fraud and scams – a 43% increase compared to the same period last year.

In conversation with the FT, Rocio Concha, Which? The Director of Policy and Advocacy said: “It is outrageous that the payments regulator is weakening key fraud protections weeks before they come into effect and that this move follows months of lobbying by companies who refuse to take fraud seriously.”

“Cutting the reimbursement cap risks causing devastating financial and emotional harm to victims of top-dollar scams, and also significantly reduces the crucial financial incentives for payment companies to adopt effective fraud protection measures.” This makes fraudsters more likely to Some payment platforms continue to be successful.”

In contrast, fintechs welcomed the news. Tiago Veiga, CEO of Aurum Solutions, says: “It is a great relief that the PSR has come to its senses and reduced the maximum payout. Such a high reimbursement cap, while well-intentioned, would have significantly impaired the ability of smaller fintechs to compete with larger banks and, in the long run, stifled innovation. With no other country having such stringent reimbursement measures, our fintech sector risks shrinking and businesses being driven out of the UK.”