World-Leading Fraud Protection: Key Takeaways on PSR

World-Leading Fraud Protection: Key Takeaways on PSR

PSR insights from Trust:Live 2024

At Trust:Live in June this year, industry leaders gathered to discuss the upcoming changes in fraud protection, particularly focusing on the Payment Systems Regulator (PSR) and the reimbursement changes set to take effect in October 2024. Janine Hirt, CEO of Innovate Finance, shared her insights on the challenges and opportunities these changes present for the financial services industry.
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The importance of consumer protection

Janine emphasised the critical need to protect consumers in the financial services sector. With the rapid approach of the October 7th deadline, there is a significant focus on ensuring a safe environment for consumers. This protection is not only beneficial for consumers but also essential for maintaining trust, which is crucial for the continued innovation and growth of the financial sector in the UK.
“There's a huge recognition of how important it is that we protect our consumers, that we ensure a safe environment for them, not just for the benefit of consumers, but we know that that consumer trust is absolutely critical if we are going to see innovation and customer choice continue to thrive here in the UK.” 

Janine Hirt, CEO of Innovate Finance
Janine Hirt sharing insights

Challenges with the implementation timeline

One of the major concerns highlighted was the timeline for implementing the reimbursement changes. The automated Reimbursement Claim Management System (RCMS) is not expected to be ready until May 1st 2025, leaving firms to manually report fraud in the interim. Such manual process pose a significant challenge, especially for smaller firms that may lack the resources to handle it efficiently.

The potential for errors and mistakes in manual reporting could undermine consumer trust in the process.

Impact on Fintechs and smaller firms

The discussion also touched on the potential impact of the upper threshold limit of £415,000 for fraud claims. Janine argued that this limit is excessive and could negatively affect Fintechs and smaller firms. She suggested a lower limit of £85,000, which would cover 99.7% of all fraud cases while being more manageable for smaller organisations. The higher limit could stifle innovation and competition, which are vital for a healthy financial ecosystem.
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Janine Hirt sharing insights on PSR

The need for cross-industry collaboration

Although PSR regulations only cover the banking and payments industries, Innovate Finance have found that more than 70% of fraud originates from telecoms and online platforms like social media. Fraud is not constrained by industry or international borders, so collaboration between industry, government, and regulators is crucial to developing effective strategies and sharing responsibility for tackling fraud.

The role of education in preventing scams

Education and collaboration were identified as key components in the fight against fraud. Janine stressed the importance of consumer education and awareness programs to prevent fraud from occurring in the first place. While reimbursement is essential, preventing fraud can save consumers from the mental distress associated with being defrauded.
Janine Hirt sharing insights on PSR

Looking ahead: Ambitious goals for fraud reduction

Janine called for ambitious targets in the fight against fraud, suggesting that the industry should aim to reduce fraud by half or more by 2030. This goal requires a concerted effort from all stakeholders, including regulators, government, and industry players. By working together, the financial services sector can create a safer and more secure environment for consumers, fostering trust and enabling continued innovation.

Conclusion

The discussions at Trust Live 2024 highlighted the complexities and challenges of implementing new fraud protection measures. While the goals are clear - protecting consumers and maintaining trust - the path to achieving them requires careful consideration of timelines, thresholds, and the need for collaboration and education. As the October deadline approaches, the industry must work together to ensure a smooth transition and a safer financial environment for all.

The opinions expressed here are those of the contributor and do not necessarily reflect the views of LexisNexis® Risk Solutions or its partners.

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