MPs welcome regulator proposals to make banks spot fraudulent contactless payments

 
Oliver Gill
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Treasury Select Committee members called the current contactless payment system "chaotic" (Source: Getty)

Financial regulators are planning to shift the onus onto banks to identify fraudulent contactless payment transactions.

The Financial Conduct Authority (FCA) chairman John Griffith-Jones will today set out the watchdog's proposals in a letter to the chair of the Treasury Select Committee Andrew Tyrie.

In September an investigation by a consumer organisation highlighted some banks are failing to routinely query contactless payments made from customers' accounts.

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The investigation prompted the select committee's questioning of Griffith-Jones and the managing director of the Payment Systems Regulator (PSR), Hannah Nixon, in January. At the hearing the FCA pledged to write to Tyrie on the issue of contactless payment fraud.

The FCA met with "a number of key players" on 7 February, Griffith-Jones wrote in his letter.

Subsequent to this, the issues regulators are exploring include: removing the responsibility for identifying fraudulent transactions from customers, introducing technical enhancements to reduce the likelihood of contactless fraud and making it easier for customers to request a non-contactless debit or credit card.

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Responding to the FCA's plans, Tyrie said: “As things stand, in order to mitigate the risk of fraud, customers are expected to comb through their bank statements months after they have instructed their banks to block their lost or stolen cards. That seems unreasonable. The Treasury Committee has urged the FCA to sort this out.

So the package of measures to resolve this problem, which the FCA proposes in their letter to the committee, is welcome.

Offline

The FCA highlighted a key risk regarding contactless payments was in relation to those transacted "offline".

Many, particularly larger, retailers store payments locally before sending them in a batch to be processed at the end of the day. Around 45 per cent of contactless payments are transacted in this way.

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Meanwhile, in January, committee member Rachel Reeves highlighted in some circumstances cards were able to be used several months after they were cancelled. Griffith-Jones wrote in his letter: "I agree with the committee that this needs further action, which is in train."

Reflecting on the latest FCA proposals, Reeves said: "I welcome the news that the FCA is looking at ways of dealing with the problem.

The current chaotic system needs to be reformed to minimise the risk to consumers of fraudulent transactions. Bank customers must have full confidence the system works and that their money is safe. That's not the case at present.

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