The Effect of PSR's APP Fraud Regulation Since Its Introduction
The Payment Systems Regulator's (PSR) Authorised Push Payment (APP) fraud reimbursement requirement, which came into effect on 7 October 2024, represents a landmark regulatory intervention in the UK's financial services sector. This mandatory framework has fundamentally transformed how victims of APP fraud are protected and compensated, marking the world's first comprehensive mandatory reimbursement scheme for this type of fraud[1][2].
Background and Implementation
The PSR's APP fraud reimbursement requirement emerged from mounting concerns about the inconsistent treatment of fraud victims across different payment service providers. Prior to the regulation, reimbursement was governed by the voluntary Contingent Reimbursement Model (CRM) Code, which only covered around 10 major banking groups representing approximately 90% of recorded APP frauds[3]. Under this voluntary system, reimbursement rates varied significantly between institutions, with some banks reimbursing 95% of cases while others reimbursed as little as 3%[4].
The regulation applies to all payments made through the Faster Payments System and CHAPS, covering domestic UK bank transfers up to a maximum reimbursement limit of £85,000[5]. This limit was reduced from the originally proposed £415,000 following industry concerns about the disproportionate impact on smaller firms[6]. The framework requires both sending and receiving payment service providers to share reimbursement costs on a 50:50 basis, creating unprecedented incentives for fraud prevention across the entire payment ecosystem[1].
Key Statistical Outcomes
Reimbursement Performance
The regulation has delivered significant improvements in victim protection during its first six months of operation (October 2024 - March 2025):
Fraud Volume and Value Trends
The regulation's implementation coincided with notable changes in APP fraud patterns:
Pre-regulation trends (2022-2023):
Post-regulation context (2024):
Claims Processing Efficiency
The regulation has established consistent minimum standards for claims handling:
Industry Coverage and Scope
The mandatory framework has dramatically expanded the reach of APP fraud protection:
Fraud Prevention Incentives
The 50:50 cost-sharing mechanism has created powerful incentives for fraud prevention:
Unintended Consequences and Adaptations
The regulation has prompted several notable behavioural changes:
Fraud Displacement
Industry analysis suggests fraudsters are adapting their tactics in response to the new rules:
Moral Hazard Concerns
Despite initial concerns about consumer complacency, the data suggest minimal moral hazard effects:
Regulatory Monitoring and Compliance
The PSR has established comprehensive monitoring systems:
Future Outlook and Challenges
Looking ahead, several key challenges and opportunities emerge:
Cross-Border Fraud
The regulation's domestic focus has created potential vulnerabilities in cross-border payments, where fraudsters may exploit regulatory gaps and jurisdictional complexities[20]. Industry experts highlight that international payments remain outside the reimbursement framework, potentially creating displacement effects[20].
Technology and Innovation
The regulatory pressure has accelerated investment in fraud prevention technologies:
Regulatory Evolution
The PSR is scheduled for abolition in 2025, with its responsibilities transferring to the Financial Conduct Authority (FCA)[22]. This transition will likely bring APP fraud reimbursement under the broader Consumer Duty framework, potentially expanding protection requirements[22].
Conclusion
The PSR's APP fraud reimbursement requirement has achieved significant success in its first six months of operation, delivering substantial improvements in victim protection and reimbursement consistency. The 87% reimbursement rate represents a marked improvement from the 68% achieved under the voluntary system, while the sixfold increase in participating firms demonstrates the regulation's comprehensive reach[9][7].
However, the regulation has also prompted adaptive responses from fraudsters, with evidence of displacement towards international payments and other fraud types. The 81% increase in international payment fraud cases and 93% increase in losses suggests that comprehensive fraud prevention requires continued vigilance and potential expansion of regulatory frameworks[17].
The regulation's success in establishing consistent minimum standards while maintaining relatively low rejection rates (3% for consumer caution failures) demonstrates that effective consumer protection can be achieved without creating excessive moral hazard[7]. As the regulatory framework evolves under FCA oversight, the foundations established by the PSR provide a robust platform for continued enhancement of fraud victim protection in the UK's payment ecosystem.
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Head of Global Marketing | XConnect | Mobile Identity Marketing Expert
3moTL;DR: In six months, the UK’s mandatory APP fraud reimbursement regime has transformed outcomes for victims: 87% of in-scope claims reimbursed, £66m returned, and claim resolution in five days or less. A real win for consumer protection. But fraudsters adapt fast: case volumes are down, losses are up. APP fraud has gone premium. And now we’re seeing an 81% rise in international fraud cases, a clear sign of displacement. It’s a strong start, but if prevention doesn’t scale to match, reimbursement will simply become the cost of being reactive. Time to harden the ecosystem, not just patch the consequences.