According to the latest figures from UK Finance, Authorised push payment (APP) fraud losses reached £459.7million in 2023, with the number of cases leaping by 12%.

The UK’s Payment Systems Regulator is pushing plans to improve protections for victims of APP fraud that will see the vast majority of money – up to £415,000 – lost to APP frauds reimbursed to victims. Despite considerable industry pushback, the new rules are set to come into force in October 2024.

To help firms mitigate risk and protect balance sheets from any adverse effects from the new regulations, Lloyds broker Elmore and Green Swan have collaborated on the development of a new APP insurance product to protect UK financial institutions processing Faster Payments.

Reimbursement rules require all PSPs, sending payments over Faster Payments, to reimburse their customers who become victims of APP fraud (unless gross negligence can be proved) within five business days of the APP fraud being reported. The new rules are a potential minefield for UK financial institutions and particularly small to medium-sized firms, who may struggle to bear the financial impact of such reimbursements.

‘’All Financial Institutions that have an APP exposure are going to need to look at the insurance option for mitigating this new risk,” says Leven Li, co-founder of Green Swan. “There are unintended consequences from the APP reimbursement regulations that have serious implications for many firms. The EMI industry, and especially those with Agents and Distributors, all face new issues under the new APP fraud rules.”