Alex Reddish, head of market expansion & GTM strategy, Tribe Payments:
The UK government’s plans to delay payments by up to 72 hours to prevent fraud is well-intentioned, but just like the newly mandated APP reimbursement regulations, it could lead to a host of unintended and unfortunate consequences. And it will be consumers who lose out the most.
On the surface, it seems sensible to give banks and PSPs more time to investigate suspected fraud. But it’s clear that the tight investigation timeframe of five days under the APP reimbursement rules has now created a situation where consumers will face even more friction in their payments—at a time when the industry has made huge strides in removing friction without compromising payment security.
Jamming payment flows while also encouraging instant payments is counterintuitive to the government’s aim of making payments more efficient. Not to mention how this will affect PSPs’ obligations under other regulations like Consumer Duty. Not only will these delays cause huge frustration and anxiety for customers, but it could also cause them to be subject to late payment fees and penalties, and potentially damage their credit records. For businesses, it could mean liquidity and cash flow problems while transactions are investigated.
The government states that banks and PSPs can implement the 72-hour delay when there are reasonable grounds to suspect fraud. But the fact is that today’s lightning-quick transaction monitoring tools and fraud management systems can spot and stop fraud in real time without disrupting customer payment flows.
The government has also ignored the fact that most of the fraud it’s trying to tackle originates from social media and tech entities that are dragging their heels and refusing to take accountability in giving APP fraudsters room to operate. It’s a fact that Meta platforms are the biggest source of scams worldwide. Financial institutions shouldn’t be the only ones reimbursing fraud victims.
But beyond the immediate impact on consumers and businesses, this approach could stifle the broader fintech ecosystem. Fintechs rely heavily on banks to drive innovation in payments, but with new players already under more pressure than ever, slowing down payment flows adds friction that could hinder growth across the sector. If the government is serious about positioning the UK as the world’s leading fintech hub, then half-baked plans like these which may dampen innovation and competition are not the way to go about it.
We don’t want a repeat of the furore that happened following the initial APP reimbursement rules announcement. Rightly or wrongly, many banks and PSPs felt blindsided by a short-sighted reaction to a fast-growing form of fraud.
The government and regulators owe it to consumers to pause for breath and listen to all stakeholders’ views, and not just those who shout the loudest. Only then will we have fully formed regulations that balance consumer protection with ecosystem competition.”
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