This decision by the PSR board reduces the maximum claim amount from the previously proposed £415,000 limit. The regulator said the new £85,000 limit will cover over 99% of APP scam claims.

A final policy statement to explain the reasoning for the decision will be published next week.

Rocio Concha, director of policy and advocacy of consumer group Which?, said: “This decision puts all of us at greater risk of being targeted by criminals because it reduces the incentives for banks and payments firms to take fraud prevention seriously. 

“The regulator has shamefully sidelined scam victims, despite the evidence showing that this decision could have a negative financial and psychological impact on them. Instead, it caved into a lobbying campaign from some firms in the payments industry, some of which have already been warned by the FCA for their role in facilitating fraud.

“People don’t fall victim to scams because they’re careless, but because they’re ruthlessly manipulated. As the disastrous consequences of this decision for scam victims become apparent, the regulator must carefully monitor its impact and be ready to intervene with better protections for victims along with stronger financial incentives for banks and payments firms to tackle fraud.”