The UK’s biggest banks have failed in their bid to levy a “transaction fee” of nearly 3p to compensate victims of banking fraud after an industry consultation deemed the plan unworkable.
Seven banks including Barclays, HSBC, Lloyds and RBS had proposed introducing a 2.9p charge when customers transferred sums of money above £30. This would have been paid into a central fund to reimburse “no blame” victims of banking scams who had done “everything expected of them” to prevent fraud.
However, the plans have been dropped due to a “lack of consensus” among banks and payment providers, who were reluctant to absorb the costs of a blanket charge — or risk the wrath of their customers by passing it on to them.
“There are lots of different business models in banking, and certain models mean the experience of fraud is much lower,” said Paul Horlock, chief executive of Pay.uk, the industry group which carried out the consultation.
Under the proposed levy, some digital challenger banks could have been “asked to pay a lot more into the central pot than their customers would ever recover”, he said.
Other challenger banks had raised competition concerns, despite a pledge not to apply the levy to the first 100,000 transactions in a bid to gain their support.
UK Finance, the trade body that proposed the 2.9p charge on behalf of the seven banks, said it was “disappointed a way forward has not yet been agreed.”
Bank are under pressure to tackle the issue of compensating victims as fraud spirals, but it has also become a point of difference for attracting customers. Earlier this year, TSB became the first UK bank to offer a “fraud refund guarantee” to customers who were the “innocent victims of fraud”.
This goes much further than the voluntary code of practice the industry adopted in May, which was aimed at compensating consumers more readily in certain circumstances.
“There wasn’t a consensus for the levy, but there was consensus that consumers should be reimbursed when they are the innocent victims of fraud,” Mr Horlock said.
Pay.uk said it would now work with payment providers to explore the possibility of creating a self-funded guarantee scheme — similar to the Direct Debit guarantee — that would ensure customers who fell victim to transfer scams were “treated consistently”.
UK consumers lost £354m to push payment fraud last year, according to UK Finance, with the average loss totalling over £4,000. Fraudsters use a range of sophisticated techniques to scam customers into transferring money to bogus accounts, including posing as banking staff or intercepting payment requests sent via email.
Jenny Ross, money editor at consumer group Which? said: “It is incredibly disappointing that the banking industry cannot reach agreement on how to reimburse innocent customers, and no one else seems willing to step up to protect victims.
“It’s clear that a voluntary, industry-led approach to protecting scam victims is not enough. The next government must work with the regulator to make the code and reimbursement mandatory — to finally ensure millions of people are no longer at risk of losing life-changing sums of money.”