The Treasury and City watchdog have raised concerns over a fraud refund scheme from the UK payments regulator that firms have warned could do long-lasting damage to the industry, City A.M. understands.

Under new rules from the Payment Systems Regulator (PSR), banks and fintechs would be forced to fully reimburse victims of authorised push payment (APP) fraud up to a limit of £415,000 from 7 October. The cost would be split between the firms used to send and receive the payment.