U.K. considers a faster-payments slowdown, Brazil moves ahead on CBDC

The U.K. government on Tuesday proposed a draft bill that would let banks and payment service providers put suspicious-looking peer-to-peer payments on hold for up to four days to conduct security reviews, as part of the country's broader plan to minimize instant-payment scams and fraud within the U.K. Currently U.K. banks process many P2P payments instantly, but they are required to clear by the next business day.

The move comes after the U.K. last year finalized a rule requiring banks to reimburse their customers who are victims of instant-payment scams beginning this fall. Since 2022, U.K. financial authorities have been developing a legal framework for protecting consumers who are tricked into sending funds to fraudsters via numerous types of scams leveraging Faster Payments, the U.K.'s real-time payments system launched in 2008.

During the first half of 2023, the U.K. saw 116,324 cases of authorized push payment (APP) scams leveraging its faster-payments service, according to a statement from the U.K. Parliament. Similar scams are also rampant in the U.S., where victims are prompted to make irreversible bank account funds-transfers to fraudsters via legitimate-looking emails, texts and phone calls. U.S. lawmakers are pressuring peer-to-peer payment providers including Early Warning Services' Zelle, Block's Cash App and PayPal's Venmo to increase consumer protections. EWS said the firm reimburses certain victims of some Zelle scams, and lawmakers recently asked EWS to clarify its reimbursement policies for scam victims.

The U.K.'s newest proposal would give banks up to four days to explore whether a suspicious P2P transaction is fraudulent before processing it. Banks would have to notify the customer of the delayed payment, the reason for the delay and give the customer streamlined methods to provide information or take actions to clear up the confusion. Banks would also be liable for any interest or charges the customer incurs as a result of a delayed payment. 

The U.K. government is soliciting public comments on the proposal through April 12, 2024, with the goal of finalizing the new rule by midyear and implementing it on Oct. 7, 2024, the same date that banks are required to begin reimbursing consumers for APP scams. Under that rule, banks must reimburse consumers who are victims of APP scams within five business days after the victim reports the incident. The maximum compensation amount the government originally set is £415,000 (US$530,000). To be reimbursed for accidentally authorizing a payment to a scammer, victims must demonstrate that they observed reasonable standards of caution, including any police warnings about the transaction in question, and that they reported the scam to authorities within 13 months of its authorization. —Kate Fitzgerald

Giesecke+Devrient, the Munich-based payment technology firm, has agreed to work with Brazil's central bank to develop an offline payment approach to a central bank digital currency feature, according to Ledger Insights. The project is part of Banco do Brasil's "Drex" CBDC tests to encourage innovation around interbank settlement for tokenized deposits. The offline CBDC approach would enable users in remote areas without internet access to conduct secure, wholesale bank transactions; it could also provide secure transfers in case of power outages or disasters. G+D helped develop offline payments for Hong Kong's CBDC trials. — Kate Fitzgerald

Federal Reserve Chairman Jerome Powell has clarified that the U.S. is unlikely to issue its own digital currency in the foreseeable future, Yahoo Finance reports. The move marks an official divergence from other countries, including India, that are moving full speed ahead on CBDC development.

"We're nowhere near recommending — or let alone adopting — a central bank digital currency in any form," Powell told lawmakers in a March 7 hearing before the U.S. Senate Committee on Banking, Housing and Urban Affairs, noting that the Fed isn't interested in establishing an alternative banking system. 

CBDCs are in various stages of exploration in 130 countries, with nine countries that are part of the G20 actively piloting the currencies, according to Forbes. China and Singapore launched a CBDC pilot last year aimed at streamlining cross-border payments, and India this year significantly expanded its CBDC pilot meant to increase consumer financial access and merchant options. —Kate Fitzgerald