Elmore Insurance Brokers has partnered with RegTech company Green Swan Compliance to create an Authorised Push Payment (APP) Fraud Reimbursement Insurance product tailored for eligible UK banks, Payment Service Providers, E-Money Institutions, and Authorised Payment Institutions.
Recent statistics from UK Finance reveal that APP fraud losses in the UK reached £459.7 million in 2023, marking a 12% increase in reported cases. In response, the UK’s Payment Systems Regulator is working on new protections for APP fraud victims, which will see up to £415,000—in most cases—reimbursed to those affected. Despite substantial pushback from the industry, these regulations are scheduled to take effect in October 2024.
To assist financial institutions in managing risks associated with these forthcoming regulations, Lloyds broker Elmore and Green Swan have developed the APP insurance product specifically designed for UK entities engaged in processing Faster Payments.
Under the forthcoming reimbursement rules, all Payment Service Providers involved in Faster Payments will be mandated to reimburse customers who fall victim to APP fraud—unless gross negligence is proven—within five business days of the fraud being reported. This requirement poses significant challenges, particularly for small to medium-sized firms that may struggle with the financial burden of such reimbursements.
“All Financial Institutions with any APP exposure will need to consider insurance as a viable option for managing this new risk,” states Leven Li, co-founder of Green Swan. “There are unintended consequences arising from the APP reimbursement regulations that could significantly impact many firms, particularly in the EMI sector and those with Agents and Distributors, who face unique challenges under the new APP fraud rules.”