The UK Government has announced new legislation that allows banks to impose a three-day hold on suspicious payments.
According to Financial Reporter, this extended period, aimed at enhancing investigation efforts, seeks to mitigate the substantial losses from fraud, which hit £460m last year. The adjustment represents a departure from the current requirement, which dictates that payments must be processed or rejected by the end of the next business day.
Economic Secretary to the Treasury, Tulip Siddiq, emphasized the necessity of the new law, stating, “Hundreds of millions of pounds are lost to scammers each year, targeting vulnerable communities and ruining the lives of ordinary people. We need to protect these people better, which is why we are giving banks more time to investigate suspicious payments and break the criminal spell that scammers weave.”
While the initiative is primarily protective, it does raise concerns about its impact on everyday banking, particularly for essential transactions like mortgage payments. Jack Kerr, director of Appdome, highlighted the potential drawbacks of delayed transactions, “This approach can severely disrupt the user experience, especially when it impacts essential payments like mortgages.” He advocates for the implementation of automated fraud detection systems that can preemptively identify threats, thus reducing the need for such disruptive measures.
Kerr further noted the increasing reliance on mobile banking apps, urging a focus on app security. “According to YouGov data, 33% of Brits use their mobile banking app daily, which makes them a prime target for fraud,” he remarked. Appdome’s survey underscores the high consumer expectations for security, with nearly all respondents expecting robust fraud protection within apps.
Additionally, Mark Munson, MD of payments at Moneyhub, critiqued the new measures as superficial, advocating for deeper reforms to address fraud at its root. “The recent decision to grant banks the power to delay payments for up to four days reveals a critical flaw; banks are focused on slowing down payments rather than cutting off fraud at its source,” Munson explained. He called for stricter KYC controls and cooperation across sectors to prevent fraudsters from exploiting financial systems.
Keep up with all the latest FinTech news here.
Copyright © 2024 FinTech Global
