Banks pay out record £173m as APP fraud reimbursement hits 88%

British banks and payment companies have reimbursed a record £173 million to victims of authorised push payment (APP) fraud, marking an 88 per cent compensation rate during the first year of the regulatory reimbursement scheme, according to data from the Payment Systems Regulator.

The figures, covering the 12 months to September 2025, represent the highest reimbursement rate since the regulator introduced mandatory compensation rules, yet the rising volume of eligible claims suggests fraudsters are increasingly sophisticated in their methods.

Background and Context

APP fraud occurs when individuals are tricked into transferring money to criminals posing as legitimate recipients—typically through impersonation scams, fake investments, or romance fraud. Unlike traditional payment fraud where accounts are compromised without consent, APP victims authorise payments themselves, often under duress or deception.

The reimbursement regime, introduced by the Payment Systems Regulator in 2024, established clearer rules for when banks must compensate victims. Previously, reimbursement decisions varied significantly between institutions, leaving many consumers bearing the full financial loss.

Key Figures and Entities

The Payment Systems Regulator, an independent economic regulator established by the Financial Services and Markets Act 2000, oversees payment systems in the UK and has made tackling APP fraud a priority. Major banks including Barclays, Lloyds Banking Group, and HSBC have all implemented enhanced fraud detection systems following the regulatory changes.

According to UK Finance, the banking industry body, APP fraud losses reached £460 million in 2023, making it the largest category of payment fraud by value. The new reimbursement regime applies to all payment service providers participating in the Faster Payments Service, which processes the vast majority of UK electronic payments.

Legal and Financial Mechanisms

The reimbursement framework operates through a contingent reimbursement model requiring payment providers to assess claims based on specific criteria including the customer's vulnerability, the sophistication of the scam, and whether the provider took appropriate protective measures.

When disputes arise between sending and receiving banks about responsibility for reimbursement, cases may be escalated to the Financial Ombudsman Service. The regulator has also introduced new confirmation of payee requirements, intended to reduce instances where victims send money to accounts with mismatched names.

International Implications and Policy Response

The UK's approach to APP fraud reimbursement has attracted international attention as other jurisdictions grapple with similar challenges. The European Central Bank has cited the UK model in discussions about harmonising consumer protection across EU payment systems.

However, consumer advocacy groups including Which? argue that the 12 per cent of uncompensated victims still represent significant injustice, particularly among vulnerable populations who may struggle to prove they took reasonable precautions. The regulator has indicated it may strengthen the framework further if evidence shows persistent gaps in protection.

Sources

This report draws on data published by the Payment Systems Regulator, industry figures from UK Finance, and regulatory guidance from the Financial Conduct Authority. Additional context was sourced from official statements and consumer protection reports published between 2024 and 2025.