In October 2021 the Payment Systems Regulator (PSR) published the outcome of a regulatory review of protections available to consumers who make retail payments from one payment account directly to another.
In this blog we provide a quick summary of the outcomes of the review together with relevant links to the PSR’s website.
Consumer Protection – Call for views
Faster Payments is increasingly used for a variety of purposes, including retail purchases and this growth is expected to persist in the coming years, including from propositions developed in Open Banking.
If people continue using Faster Payments for more varied purposes, the PSR needs to be sure that people using Faster Payments continue to have enough protection to make interbank payments with confidence. There must be adequate safeguards to mitigate harm if something goes wrong.
The PSR wants to see payment systems develop and innovate in ways that work well for everyone that uses them and in February 2021 asked for views as to whether there is adequate consumer protection, or if more needs to be done to ensure that consumers and businesses are confident when making an interbank payment that they will not be disproportionately harmed if something goes wrong.
Consumer protection – PSR Response
The outcome of the PSRs review of consumer protections in interbank payments, which explains their assessment of the protections available and where they will focus their attention was published in October 2021: PS21/2 – Consumer protection in interbank payments – response to CP21/4.
The PSR’s response includes:
- Key insights on the responses provides by respondents to the call for views.
- The PSR’s response to the call for views – including:
Risks arising from these types of transactions include making an unauthorised payment, sending the wrong amount or paying the wrong person. We agree with respondents that these risks are likely to be mitigated through existing protections, including those provided by the Payment Services Regulations 2017. Where they do not, as in the case of payment fraud, we are working to ensure harm is reduced. This includes work to improve the reimbursement rate under the Contingent Reimbursement Model Code, as well as our work to ensure Confirmation of Payee is implemented more widely
The total volume and value of other interbank use cases remain low, and most risks are currently likely to be managed to acceptable levels through existing protections. At this stage, we do not propose to intervene in the market to introduce additional purchase protection. Instead, we will continue to support the market to develop in a way that promotes innovation. We agree that increased competition between Faster Payments and card payments could result in good levels of protection if service providers coordinate well.
The total volume and value of other interbank use cases remain low, and most risks are currently likely to be managed to acceptable levels through existing protections. At this stage, we do not propose to intervene in the market to introduce additional purchase protection. Instead, we will continue to support the market to develop in a way that promotes innovation. We agree that increased competition between Faster Payments and card payments could result in good levels of protection if service providers coordinate well.
While we support a market-driven approach to providing and improving consumer protection, we remain convinced that the level of consumer protection should match the level of potential harm arising from a payment. We agree with consumer representatives that relying on consumers knowing whether they are protected when they make a payment is not a viable solution. It would risk unfairly placing the blame on consumers.
We will continue to support the OBIE, Pay.UK and Faster Payments participants to reduce potential harm by improving prevention and compensation measures. We will support developments to Pay.UK’s governance of the interbank rules so it has greater ability to enforce compliance with its rules, and make rule changes that improve outcomes for consumers and businesses.
We do not currently propose to intervene to introduce additional purchase protection, but we will continue to regularly observe developments in consumer protection for Faster Payments. We will do this by monitoring:
- changes in Faster Payments volumes
- the level of payment risk and the uptake of specific uses for Faster Payments
- the level of protection offered for different types of payment
- Summary of responses.
- Summary of responses per question.
Consumer protection – PSR’s position
The PSR’s stated position is:
The PSRs stated position seeks to ensure that Faster Payments, and the service providers that use it, continue to innovate in ways that work well for consumers and businesses.