Protecting financial consumers from authorized push payment fraud: is reimbursement an optimal solution?

Yang, Chen (2025) Protecting financial consumers from authorized push payment fraud: is reimbursement an optimal solution? Journal of Financial Regulation and Compliance, 33 (4), 642-653. (doi:10.1108/JFRC-11-2024-0225).

Abstract

Purpose: this paper aims to explore the potential implications of the UK’s new mandatory reimbursement scheme as a protective measure for financial consumers against the increasing threat of authorized push payment (APP) fraud.

Design/methodology/approach: this study adopts a literature-based methodology to evaluate the UK’s new reimbursement scheme. It draws on both primary and secondary sources, including legislation, case law, regulatory documents and academic articles, aiming to provide a nuanced understanding of the extent to which the mandatory reimbursement scheme addresses the challenges posed by evolving APP fraud tactics in consumer protection.

Findings: this study finds that mandatory reimbursement reinforces the gatekeeping role of payment service providers (PSPs). While it helps mitigate the immediate financial losses experienced by victims, it may inadvertently discourage consumers from taking precautions to protect themselves against APP fraud, thereby limiting its effectiveness in overall fraud prevention. The study suggests considering an alternative approach that proportionally distributes responsibility. In addition, the study examines the scheme as an insurance mechanism, suggesting that if PSPs shift increased costs to consumers as an indirect premium charge, reimbursement may not significantly impact PSPs’ behavior. However, the lack of transparency in these charges raises fairness concerns for consumers. Nonetheless, insights from fraud management in the insurance sector offer valuable guidance for PSPs in refining anti-fraud strategies, particularly through artificial intelligence-driven technologies.

Originality/value: the value of this study lies in its forward-thinking approach, offering critical insights into the new scheme as a form of redress for APP victims.

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Contributors

Author: Chen Yang

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