Starting today, the UK government has introduced new legislation allowing banks to impose a three-day hold on suspicious payments. This move is designed to improve fraud detection and mitigate financial losses, which amounted to £460 million last year. The change marks a shift from the previous law, where banks had to process or reject payments by the end of the next business day.
How the Three-Day Hold Will Work For Suspicious Payments
The extended payment hold period gives banks more time to investigate transactions that may appear suspicious. According to Economic Secretary to the Treasury, Tulip Siddiq, the need for such a measure is critical. Furthermore, she emphasized that scammers target vulnerable communities, causing severe financial and emotional damage. By allowing more time for investigation, banks can better protect consumers from falling prey to fraud.
While this law seeks to reduce fraud, it raises concerns about how delayed payments may impact essential transactions like mortgages. For instance, Jack Kerr, director at Appdome, warns that such delays could significantly disrupt the user experience. He suggests adopting automated fraud detection systems to identify potential threats early, reducing the need for holds on suspicious payments.
Moreover, as mobile banking becomes more prevalent, with 33% of people using their apps daily, the focus on app security is essential. Kerr highlights the importance of strengthening mobile app security to meet consumer expectations for fraud prevention within apps.
Mark Munson, Managing Director of Payments at Moneyhub, criticized the new law for focusing on slowing down payments instead of addressing the root causes of fraud. Additionally, Munson advocates for stricter Know Your Customer (KYC) controls and increased collaboration across financial sectors. He believes that by tackling fraud at its source, the need for measures like payment holds could be reduced.
In conclusion, while the UK government’s new suspicious payments hold law aims to strengthen fraud prevention, it may also cause inconvenience for consumers. However, with proper security measures, like automated detection systems and improved collaboration across sectors, it is possible to strike a balance between protecting consumers and maintaining efficient banking services.