The Payments Systems Regulator has proposed slashing the amount banks must refund to fraud victims to £85,000 from £415,000.

The watchdog that oversees, money transfers contactless and other payments, has launched a consultation that will bring its restitution levels in line with the current Financial Services Compensation Scheme limit.

The PSR says its recent review found that out of over 250,000 fraud cases it monitored last year there were 18 instances of people being scammed for more than £415,000, and 411 instances of more than £85,000.

It adds: “The analysis also highlighted that almost all high-value scams are made up of multiple smaller transactions, reducing the effectiveness of transaction limits as a tool to manage exposure.”

The watchdog often deals with AAP fraud, or authorised push payments, when someone is tricked into sending money to a fraudster.

The body says the move would still mean financial firms had to “ensure enhanced consumer protections against APP scams, with clear incentives on financial firms to continue doing all they can from preventing fraud from happening in the first instance”.

It adds that “the proposed new cap will still see over 99% of claims (by volume) covered”.

The regulator’s consultation, open to interested parties, closes on 18 September, after which it will “confirm its final approach before the end of September”.