Fintech
Payments Association calls for lower fraud refunds to spur fintech innovation
In a bold move to safeguard the future of financial technology, the Payments Association has called on the UK Treasury to reduce mandatory thresholds for fraud reimbursement, warning that current policies could stifle innovation and drive smaller firms out of the market.
THE Payment Association recently urged the UK’s new Economic Secretary to the Treasury, Tulip Siddiq, to reduce the mandatory refund for authorised push payment (APP) fraud from £415,000 to £30,000.
This call is driven by concerns that the current high threshold hinders competition, stifles innovation and could force smaller companies out of the market. The association argues that a more proportionate threshold would better reflect average losses and support a healthier competitive environment.
The Payment Systems Regulators (PSR) policy, which requires refunds to victims of APP fraud, is due to come into force in October 2024. The Payments Association has raised concerns that these rules could “weaken competition, stifle innovation, reduce investment and force smaller operators into a disorderly exit from the UK”. The association also highlights the potential for increased de-banking, particularly among vulnerable and underbanked consumers.
Riccardo Tordera, Director of Policy at the Payments Associationstressed the need for regulatory change, saying: “Fintech is the future of financial services and we are ready to play our part in contributing to the growth agenda. But we need to see the regulatory change that we have been calling for for months. Good regulation enables responsible risk-taking which, in turn, drives good behavior. I remain convinced that this is the only way to ensure sustainable growth.”
The call for a tax on technology
In addition to lowering the refund threshold, the Payments Association has called for a “tech tax” on social media companies to combat fraud. This tax would make tech giants liable for the impact of Payment fraud coming from their platforms.
Tony Craddock, Chief Executive of the Payments Associationsaid: “We welcome the news on Friday 28 June that the Labour Party has drawn up plans to make technology companies responsible for reimbursing victims of online fraud, in a move away from controversial rules.”
Craddock also highlighted the need for coordinated anti-fraud measures, suggesting the appointment of a dedicated minister to oversee cross-departmental action. “Fraud is a problem that impacts every department of state, but because there is no obvious departmental leadership, it is everyone’s problem and no one’s priority. So we would be happy to appoint a dedicated minister to coordinate cross-departmental action. It is vital that anti-fraud measures are addressed in a holistic way, with all parties having some responsibility: government, law enforcement, payment providers, retail, technology and consumers.”
The Payments Association’s recommendations include a phased approach to the implementation of the cashback program, with regular reviews every six months to assess its impact on economic growth, competition, innovation and fraud levels. The association remains optimistic that these changes will foster a more innovative and competitive fintech landscape, benefiting consumers and the wider economy.
As Tordera concluded, “The expectation that the new government will demonstrate strong leadership is higher than ever. It is time to deliver growth, not just talk about it.”