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Igor - thank you. At the moment there is much activity around instant payments - the move to near real time and the addition to verify the true bank account owner. As instant payments goes international the ability to provide exchange rates for FX and crypto can become components within the cloud offered by trusted, regulated suppliers.

The use of standard APIs (Application Programming Interfaces) are becoming common as they act as a bridge between the new and old systems. They recieve and input data from the legacy core with minimum interferrance. Over time to meet growing digital banking customer requirements components can replace the existing core.

Many banks now have API departments so the old systems can be unlocked. As the majority of banks operate on overnight batch proofs the abilty to know the accurate bank balance is difficult. This was solved in the early days of faster Payments by running end of day routines multiple times. APIs will help accessing customer files that are out of sync with production.

Enjoyed your comment, see graphic: Then and Now

Jonathan - many thanks for the incisive input and comments below:

Fair comment on banks and some PSP. Both traditional and new banks along with PSPs can treat scammed customers insensitively. 

Agree on the £30K limit - its a WAG (wild arse guess).

The figure of £415K is being treated by the PA and its financial influences as a scare tactic. Complete nonsense as you rightly point out there is a review before money is paid away. Also the scammers would be at this level (and beyond) if it was a market possiblity.

I like the £100 excess option as it gives the bank/PSPs the opportunity to show compassionate on the first instance. As scammers swap 'live' names (e.g. saying take me off your list you are added on), the probability is high for another scam.

Given the PA mission is: "...helping almost 300 companies enhance their commercial interests, ... solve societal problems..." the first by delaying mandatory refunds saves bank/PSP £230 million/year as the customers carries on paying for the scammed amount. The contribution to solving societal problems is an oxymoron.   

Ketharaman - good long term positioning for the big American companies as India's international instant payments grow, where payment and FX fees are allowed, revenues will flow. 

Ketharaman - reimbursement details are being finalised by the PSR for the UK for consumers and SMEs. Larger companies where revenues exceed £5 million per year are excluded. EU is adding CoP mandates in 2024 so we’ll have to see how euro reimbursements are addressed.

Ketharaman - as an estimate for APP scams of 0.1% compared to what a what third party cheque cashing business is experiencing is optimistic. That is APP scams will be higher based on experience and the weaknessess within the current payment flow.

It is highly likely the APP scam rate will be higher greater and probably greater than 0.2%.

Yes something further needs to be done to prevent misdirected and scam instant payments. 

Ketharaman - To give an idea of loss rates in the physical cheque cashing business - "cheques cashed here" - the run rate can be 15 to 25 basis points ( 0.15 to 0.25%).

The fee for cashing the physical cheque to the end user can be up to 15% (< 2,000 bp) of the amount but normally 5% (5,000 bp) with a minimum fee.

To cash the cheque the person has to be present, prove they are who they say they are and the cheque is their's. The files are then checked to ensure that the cheque is valid. If the check and person can not be validated then they are politely turned away.

Given most APP fraud/scams the Payer has not had a physical meeting with the Payee or verified who they say they are. The UK banks with CoP - currently 10 out of 300 - do verify the account owner for domestic payments. IBAN used in International payments, usually the last instant payment of the scam, does not verify the ownership of the bank account.

The figure of 0.1% (10 basis points) for a global benchmark given the above seems low. Breaking out the benchmark by market sectors - consumer, SME and Corporate - could be more accurate.

Thank John 

Mel - completely agree: "without CoP both domestic and international payments fraud/scams will accelerate at alarming rates".

This we saw in the UK when Payment System Regulator brought in a voluntary CoP scheme - CoP 10 - for the largest banks looking after 90% instant payment traffic in 2019/20. This lead to a jump - 30%+ in APP scams. Scammers switching to non-CoP enabled banks as their hosts. Plus a reimbursement policy which varied enormously by each bank in the program from TSB (90% reimbursed) to two anonymous larger banks showing less than 20%).   

Given this experince, the PRS, with Government support, is bringing in new regs for 2024 and this should help others in their approachs to CoP. For example the EU in 2024. Thanks John

Ketharaman - Happy New Year and thanks for the information on India. It is good to hear PSPs are adding offerings to generate a mix of revenues. 

GDPR is a way of life in the UK and EU so everyone has to work with clients and there customers to ensure compliance. It is the customer's personel data and it needs protecting and the customer's approval before it can be used. Not an insurmountable challenge with all aspects of the PSP operations knowing where the personel data is and who can and canot use or store it. 

Shaju - Trust you are well and please see my latest blog 'Will Payment Service Providers Prosper' on Finextra which should help in answering your questions.

Shaju - excellent question and worthy of a blog in its own right. 

On the second question, as the saying goes, I know some one who does.

I'll come back to you early in January. Have a happy new year.  

Regards

John