Visa Partners with UK Banks to Improve Faster Payments System, Addressing £3.7Trillion Fraud Concerns
London, September 5, 2024 – Global digital payments leader Visa is collaborating with some of the UK’s largest commercial banks to overhaul the country’s fast account-to-accountpayment system, aiming to prevent billions of pounds in losses for consumers due to inconsistent payment processing.
The company is creating a new payment system that will providea formal process for UK consumers to dispute payments made through bank transfers and initiate a reimbursement process, according to a statement released Thursday. Visa is working with top UK lenders, including Barclays, Lloyds Banking Group, and HSBC Holdings, to drivethis reform initiative.
While Visa is globally renowned for its credit and debit card products, the company is seeking to improve the UK’s domestic direct debit system, a rapidly gaining popularity for automated fast payments used by individuals and businessesfor bill payments or subscriptions. Customers typically set up automatic payments on predetermined dates to avoid defaulting.
Direct debits have contributed to the widespread adoption of fast payments through bank transfers in recent years, reducing the likelihood of missed payments or late fees. Last year, UK consumers made approximately £3.7 trillion (around$4.9 trillion) in fast payments through account-to-account technology.
However, Visa recently highlighted that as more payments are processed through this system, billions of pounds are being lost due to fraud, unauthorized auto-renewals, or a lack of flexibility in bill payments.
People forget that alot of things we do habitually, and things we’re happy to pay for today, are actually not very good experiences. One of them is direct debit, Charlotte Hogg, responsible for Visa’s European operations, emphasized in an interview. It’s actually a pretty poor payment experience, especially when it comes tothe losses caused by fraud.
Although the UK boasts one of the world’s most developed digital payment systems, it also has one of the highest rates of account-to-account payment fraud.
Visa has partnered with Pay.UK, the non-profit organization operating the direct debit and faster payment systems in thecountry, to prevent fraudsters from exploiting vulnerabilities in these systems. The UK government is also planning to announce new regulations in the coming weeks, requiring banks and fintech companies to compensate consumers who fall victim to authorized push payment fraud.
Regulators announced Wednesday that following lobbying from the payments industry and feedback from government officials, theyplan to lower the maximum compensation cap for such fraud victims from £415,000 to £85,000. According to a statement from the UK’s Payment Systems Regulator (PSR), under the new cap, over 99% of consumer claims by volume will be covered.
However, some industry organizations believe the PSR’s plan doesn’t go far enough. Janine Hirt, CEO of Innovate Finance, called the proposal positive news but criticized it for allowing reimbursements or compensation in cases of gross negligence on the part of consumers. The Payment Association, representing over 200 companies in the industry, also expressed flaws in the plan, arguing that a £30,000 consumer compensation cap would be more appropriate.
The PSR stated that a two-week consultation will gather further responses from UK banks and payment companies regarding this change. The consultation is expected to conclude by September18th, with a final plan to be announced by the end of the month. The new regulations are expected to take effect on October 7th.
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