Fintech, digital assets, payments and consumer credit | UK Regulatory Outlook July 2024

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PSR policy statement on compliance and monitoring under FPS APP scams reimbursement requirement

On 12 July 2024, the Payment Systems Regulator (PSR) published a policy statement on compliance and monitoring under the Faster Payments System (FPS) reimbursement requirement to fight authorised push payment (APP) scams.

The PSR has confirmed the arrangements for payment service providers (PSPs) that are in scope of the reimbursement requirement policy to report data and information to Pay.UK. This will enable Pay.UK to effectively monitor and manage compliance with the FPS reimbursement rules.

Having considered feedback it received to its April 2024 consultation paper, the PSR has amended its final requirements, with an aim to ensure they are reasonable and proportionate.

The PSR has confirmed:

• The requirement for directed PSPs to register with Pay.UK by 20 August 2024. Registering identifies PSPs as in-scope of the policy to Pay.UK and facilitates a shared directory enabling PSPs to find one another's contact details to meet the requirements in the FPS reimbursement rules and policy, and communicate in respect of FPS APP scam claims received.
• The data required: reporting standard A. Sending PSPs in-scope of the policy must retain it and report to Pay.UK monthly in respect of transactions they have sent, to enable effective compliance monitoring with the FPS reimbursement rules.
• The reasonable limits the PSR is placing on Pay.UK in respect of the use and disclosure of the compliance data it receives.
• How PSPs must inform consumers of their rights under the policy.

The changes will be delivered through amendments to the PSR's Faster Payments APP scams legal instruments. The PSR has also published a response paper to its May 2024 consultation paper on guidance for PSPs on publishing APP scams data, together with the final version of the guidance.

The start date for the reimbursement policy is 7 October 2024.

UK regulators call for information on BigTech and digital wallets

On 15 July 2024, the Financial Conduct Authority (FCA) and PSR published a call for information (CfI) on big technology firms (BigTech) and digital wallets, as BigTech has expanded into the payments space.

The increasing use of digital wallets is a significant way BigTech is impacting on the payments landscape. The regulators explain that overseas consumers can, for example, make in-store retail transactions using digital wallets that are integrated with account-to-account payment systems. Simultaneously, digital wallets have attracted the attention of various regulators, with both the European Commission and US Department of Justice taking action against major BigTech company's business practices in this area.

The feedback to the CfI should facilitate the regulators understand the opportunities and risks of digital wallets. The CfI is requesting input on:

• The range of benefits digital wallets can bring for users.
• Whether there are any features that mean payments do not work as well as they could for consumers or businesses.
• The role of digital wallets in unlocking account-to-account payments and how they could impact competition between payment systems.
• Whether digital wallets could raise any significant competition, consumer protection or market integrity issues.
• Whether the current regulatory framework is effective.

The CfI is open until 13 September 2024, so firms operating in this space should consider providing feedback. The regulators intend to publish an update by Q1 2025, after considering the feedback.

PSR consults on APP scams reimbursement requirement guidance

On 18 July 2024, the PSR launched a consultation on draft guidance to help PSPs in their assessment of whether an APP claim made by a consumer is a private civil dispute, and therefore not reimbursable under the reimbursement requirement.

The detailed parameters for the FPS APP scams reimbursement requirement is set out in two policy statements published in July and December 2023 (PS23/3 and PS23/4). That claims relating to a civil dispute would not be reimbursable under the reimbursement requirement was confirmed in PS23/3.

The draft guidance is intended to support PSPs' compliance with the legal requirements and applies to claims for payments made via Faster Payments and the Clearing House Automated Payment System. It sets out factors that PSPs should consider when assessing whether a claim solely relates to a civil dispute and does not fall within the requirement to reimburse. As civil disputes and scams might look very similar, each instance will be a facts and circumstances assessment.

The factors cover the:

• Communication and relationship between the consumer and the alleged scammer.
• Trading status of the alleged scammer.
• Alleged scammer's capability to deliver the goods and services related to the claim.
• Extent to which the alleged scammer deceived the consumer as to the purpose of the payment.
• Information held by the receiving PSP about the relevant account.

The guidance is "indicative only" and does not specify evidentiary requirements. PSPs are expected to continue to have regard to the best practice guide to support their assessment of a reimbursable APP scam.

The deadline for comments on the draft guidance is 8 August 2024, so firms operating in this space should consider providing feedback. The PSR expects to publish the final guidance in mid-September 2024.