On 1 July 2026 the Payment Systems Regulator published an independent review of the Authorised Push Payment fraud reimbursement rules. It changes what a buyer should pay for a UK payment institution, and what a seller should prepare before going to market.
Since October 2024, buyers of UK payment firms have carried a quiet assumption. Authorised Push Payment fraud reimbursement, usually shortened to APP fraud, is a growing cost, so discount any firm exposed to it. The regulator has now tested that assumption with data. The assumption is weaker than the market has been pricing.
The review was carried out by Frontier Economics and published by the PSR. APP fraud losses sent over Faster Payments fell by about 21 per cent after the rules came in. That is an estimated £73 million a year, and nearly 35,000 fewer scams. The reimbursement rate rose from 54 per cent to 65 per cent. The PSR reports that firms now reimburse 97 per cent of claims that fall inside the policy scope. Even after the extra costs firms carry to run the scheme, Frontier put the net benefit at £17 million to £29 million a year.
One finding matters more than the rest for anyone pricing a deal. Some firms had warned that mandatory reimbursement would push payment providers out of the market. The review found no clear evidence of that so far. It also found no sign that customers became less careful because they knew they would be refunded. It did note that some firms felt the cost more than others, and that the longer term effects are not yet settled.
So the blanket discount for reimbursement risk no longer holds. The exposure did not disappear. It became measurable, and it became specific to the firm.
What actually changed for a deal
Buyers price what they can see. Before October 2024, reimbursement risk was a fear without a number. A buyer could suspect a target carried fraud exposure, but had no clean way to size it, so the safe move was a broad discount on any firm with consumer payment flow.
That has changed. Reimbursement performance is now documented and reportable. The PSR publishes firm-level performance data. Each firm holds its own reimbursement rate, its claim volumes, and its resolution times. Firms report that data to Pay.UK and the PSR under the reimbursement scheme’s compliance reporting, and the PSR shares it with the FCA. A vague risk has become a line a buyer can test in due diligence.
A number a buyer can test is a number a buyer can argue about. That is better for a well run firm than a broad haircut applied without evidence. It is worse for a firm that would rather the question stayed vague.
That cuts both ways. A firm that can produce a clean, documented reimbursement record removes a reason to discount it. A firm that cannot hands the buyer a price chip. The number moves from the buyer’s imagination to the data room.
The discount did not vanish. It moved.
The same review found something a seller needs to hear. Firms apply the rules inconsistently. Similar claims get different outcomes at different firms. The regulator has said it will act where implementation is poor.
In practice, that inconsistency shows up in two places a buyer will read. How long the firm takes to resolve a claim, and how often it rejects one and on what grounds. Two firms can report the same headline reimbursement rate and still carry very different real exposure once those details are on the table.
That is why the discount did not disappear. It sharpened. A clean, well run reimbursement record now earns a premium. A messy claims history, with slow resolution and high rejection rates, now earns a discount. What used to be a fear hanging over the whole sector is now a question about one specific firm.
The review is also a map of where the risk still sits. The biggest improvements came from the firms that had the highest APP fraud before the rules. For a buyer, that is a direct signal. A target with a poor fraud history before October 2024, and no evidence of improvement since, is where the reimbursement exposure concentrates.
Two numbers that look opposite
A short check before the first call
Whether you are buying or selling, four things are worth pulling before the first conversation. None of them need a lawyer to start.
- Twelve to twenty-four months of APP reimbursement performance: the reimbursement rate, claim volumes, average resolution time, and rejections by reason.
- The firm’s APP claims register and its reimbursement reporting to Pay.UK and the PSR. Use the FCA payments fraud return as a cross-check, not the main record.
- A clean split between in-scope flow and out-of-scope flow. The rules cover APP scams over Faster Payments and CHAPS between UK accounts. Card payments, cash, cheques, international payments, and larger corporate flows sit outside. Individuals, microenterprises, and eligible charities can be in scope. Size the exposure on the flow that actually falls inside the policy.
- A simple sensitivity model for policy change. The PSR will consult in December 2026 on parts of the regime, including how unresolved claims are handled, reporting, data, and guidance. Do not assume today’s rules are fixed.
For a seller, this is the evidence that removes a discount. For a buyer, it is the difference between pricing the real exposure and pricing a fear.
When this does not apply
The reimbursement requirement covers APP scams sent over Faster Payments and CHAPS between UK accounts. A firm with no such flow does not carry this specific line. A pure card acquirer sits outside it. So do some foreign exchange models and account information models that never touch that flow.
This is also a valuation read, not compliance advice. The point is not how to comply with the rules. The point is how the rules move the price, and how a seller or a buyer should prepare for the number before it surfaces in diligence.
Two numbers that look opposite
A buyer reading the news will see a second number that seems to contradict the first. UK Finance reported APP fraud losses of £576.4 million in 2025, up 19 per cent.
Both numbers are correct. They count different things. Frontier measured by the date of the scam and looked at in-scope losses, and asked whether the policy reduced them. UK Finance measured by the date a claim closed and covered a wider set of payments and accounts, and reported how much fraud the whole system saw. One answers whether the rules reduced in-scope losses. The other answers how large the fraud problem is across everything.
For a deal, the practical point is simple. Know which number applies to the firm in front of you, and know which flows sit inside the policy. A headline about rising fraud across the market says little about the exposure of one SPI or API with a clean in-scope record. Do not price the headline. Price the firm.
There is an honest limit to the good news. Reimbursement returns money to victims. It does not stop the fraud. The funds still reach criminals, and the review does not claim otherwise. That is a real weakness in the policy. It does not change the valuation read, but it is worth stating plainly.
Why the timing matters
The current cap is £85,000 a claim, in force from 7 October 2024 and set by reference to the deposit protection limit. It does not automatically track future changes to that limit. The PSR will consult in December 2026 on parts of the regime, including how unresolved claims are handled, reporting, data, and guidance. Separately, the PSR’s work is moving into the FCA. Whoever owns the licence when any change lands inherits it.
A first-year result that reads well today is not a permanent settlement. Price the exposure on today’s rules, and treat a future change as a scenario, not a certainty.
For example, clearer guidance on unresolved claims, or on which disputes count as scams, would change how many claims a firm must pay, and how fast. A seller who models that now is pricing on more than a snapshot. A buyer who ignores it is inheriting a moving number without knowing it moves.
The move
Before the first buyer or seller conversation, pull the firm’s APP reimbursement data and its claims reporting. Make the number known, not discovered. A number that surfaces late in due diligence hands control to the other side. A buyer who finds a bad number in week six does not just adjust the price. They reopen every other assumption in the deal.
For a seller, a clean, documented record removes a discount a buyer would otherwise apply. For a buyer, that record tells you whether the price in front of you reflects the real, firm-specific exposure, or a sector-wide fear that the regulator’s own data no longer supports.
The reimbursement rules were read for two years as a cost. The PSR’s review reframes them as a question a buyer can price and a seller can answer. The firms that can answer it well are worth more. The firms that cannot are worth exactly as much less as the gap they leave in the data room.
Frequently asked questions
Does APP fraud reimbursement affect the value of a UK payment institution?
Yes, but the effect is now specific to the firm, not a blanket sector discount. Since October 2024, a firm’s reimbursement rate, claim volumes and resolution times are documented and reportable. A buyer can price the real exposure. A clean, well-documented record removes a discount. A messy one invites a price cut.
Is APP fraud reimbursement liability passed on when you buy a UK payment institution?
Usually yes. The reimbursement obligation sits on the authorised firm, so when you buy the entity, you inherit its obligations and its open claims. That is why a buyer treats the claims history as a diligence item, and prices around it.
Which payments are covered by the APP fraud reimbursement rules?
APP scams sent over Faster Payments or CHAPS between UK accounts, for individuals, microenterprises and eligible charities. Card, cash, cheque, international and larger corporate payments sit outside. So a firm’s exposure depends on how much of its flow runs on those rails.
