The regulator is currently consulting on this change, having reviewed data on high-value APP scams, which are a significant issue and have a devastating impact on victims.

When the PSR published its requirements for payment firms to reimburse APP scams victims in December 2023, it committed to consider high value APP fraud claims and publish the findings. The PSR’s review found that – out of over 250,000 cases – there were 18 instances in 2023 of people being scammed for more than £415,000, and 411 instances of more than £85,000. The analysis also highlighted that almost all high value scams are made up of multiple smaller transactions, reducing the effectiveness of transaction limits as a tool to manage exposure.

The new cap, if confirmed, would bring the amount in line with the Financial Services Compensation Scheme (FSCS) limit which is currently £85,000 and well understood by consumers. The previous maximum reimbursement value had been set at £415,000, in line with the Financial Ombudsman maximum reimbursement limit at that time.

Rocio Concha, Which? director of policy and advocacy, criticised the potential compensation reduction.

He said: “The PSR’s report is clear – victims of high-value fraud, such as investment scams and house purchases, stand to have their lives destroyed by this screeching U-turn.

“Yet somehow the regulator’s conclusion is that these people should be abandoned to provide a small benefit for parts of the finance industry that have been warned over their role in facilitating financial crime.”

Mr Concha added: “Having previously ruled out a lower threshold because there would be ‘significant harm to victims’, the PSR has caved in to pressure from payment firms and ministers and dropped the crucial principle that a higher reimbursement limit gives the finance industry strong incentives to invest in improved fraud security measures, which could have disastrous consequences for victims.

“The regulator must stick to its original plan for a £415,000 limit to protect victims of high-value scams. If this government is serious about fighting fraud, it must support the implementation of the new reimbursement scheme in full and on 7 October.”

In terms of volume, the proposed new cap will still see over 99% of claims covered.

David Geale, the PSR’s managing director, commented: “We listened to concerns about the reimbursement limit and committed to collecting more evidence to inform our approach.

“As a result, we are now consulting on a limit that still covers the vast majority of authorised push payment scams and strikes the right balance.

“Under our proposals, consumers in the UK will still receive world-leading protection, payment providers will still be heavily incentivised to improve anti-fraud protections and we maintain effective market competition and innovation.”

Pay.UK, which operates Faster Payments, the payment system to which the protections apply and through which most APP fraud flows, has confirmed it will be ready for 7 October.

The consultation closes on 18 September. The PSR will confirm its final approach before the end of September.