The government states that were there are reasonable grounds to suspect a payment is fraudulent they can implement a delay. The legislation states that a payment service provider (PSP) must inform the payer this action as soon as possible, give a reason for the delay, and ask for any information or action required of the payer to enable the payment service provider to decide whether to execute the order.

This draft regulation would act as an amendment to the 2017 Payment Services Regulations, which requires PSPs must execute a payment within a maximum time limit.

This move comes after findings that UK bank fraud losses topped £1 billion last year. Authorised Push Payment (APP) scams take up a large part of this cost, with APP reimbursement legislation coming into effect on 7 October from the Payment Systems Regulator (PSR). The PSR recently confirmed it would be cutting the reimbursement limit of this legislation to £85,000.

Tulip Siddiq, Economic Secretary to the UK Treasury, Tulip Siddiq said: “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.”

Lord Sir David Hanson, Minister of State with Responsibility for Fraud, commented: “Fraud accounts for over a third of all crime perpetrated in England and Wales, making it the most prevalent form of crime commitment in the country. This has been driven by a growing number of purchase scams and the emergence of so-called ‘romance scams’, where victims target vulnerable people and trick them into transferring large amounts of money by pretending to be interested in a romantic relationship.

“The new rules will help protect people against these types of scams by allowing banks up to an additional 72 hours to investigate suspicious payments. Currently banks must either process or refuse a payment by the end of the next business day.”

Ben Donaldson, managing director of economic crime, UK Finance added: “This could allow payment service providers time to get in touch with customers and give them the advice and support they need to avoid being coerced by the criminals who want to steal their money. This could potentially limit the psychological harms that these awful crimes can cause and stop money getting into the hands of criminals.

“Banks who have reasonable grounds to suspect a payment is fraudulent will need to inform customers when a payment is being delayed. They will also need to explain what the customer needs to do in order to unblock the payment.

“The need for evidence to trigger a delay will help protect people and businesses from unnecessary payment delays. Banks will also be required to compensate customers for any interest or late payment fees they incur as a result of delays.”

Jack Kerr, director, Appdome, said: “While a frozen bank account serves as a protective measure for consumers, this approach can severely disrupt the user experience, especially when it impacts essential payments like mortgages. To avoid these complications, financial institutions must implement automated fraud detection systems that operate in real-time, identifying threats before they escalate. By doing so, companies can minimise the need for disruptive measures like account freezes, allowing consumers to maintain seamless access to their funds.

“More specifically, banks need to place a strong focus on the security of their mobile apps. According to YouGov data, 33% of Brits use their mobile banking app daily, which makes them a prime target for fraud. Simultaneously, consumer expectations are shifting, and Appdome’s recent survey of mobile consumers revealed that 99.5% of consumers expect mobile apps to protect them against fraud. This underscores the responsibility to prioritise security to not only comply with regulations but also to enhance user trust and loyalty."