APP fraud has quickly become one of the most significant types of fraud in the UK, with losses totalling nearly £500 million in the last year. This has prompted a clamour among consumer groups and politicians for banks to tackle the epidemic and to speed up the process of reimbursement for blameless victims.

Earlier this month, the Payment Systems Regulator unveiled new rules, set to come into force in 2024.

While welcoming some aspects of the new plan, the Payments Association, which represents more than 300 firms, says that two policies have potential unintended consequences, and one important issue has been omitted altogether.

First, says the group, the move to ensure that all consumers experiencing APP fraud will get their money back, unless they are “grossly negligent”, may increase fraud because people will pretend to be “vulnerable” and thus becoming automatically entitled to reimbursement even when they have been acting intentionally.

The decision to split the cost of compensation 50/50 between the sending bank/issuer and the receiving bank/issuer will likely make firms more cautious about opening marginal accounts, hurting the low income and vulnerable people.

Finally, the association argues that not involving social media companies means that APP fraud will not be stopped at its source