Authorized push payment (APP)

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What is an authorized push payment?

An authorized push payment (APP) refers to a type of electronic payment where the payer authorizes the transfer of funds from their account to another account, typically through online banking or a mobile banking app. These payments are initiated by the payer, and once authorized, the funds are pushed directly from the payer's bank account to the recipient's account. Push payments can include transactions, such as direct deposits, digital wallets or bank transfers.

Understanding authorized push payments (APP): How does it work?

With authorized push payments, the funds are specifically pushed by the payer’s account into the payee’s account. This is different from traditional payments, where the payee initiates the transaction and ‘pulls’ the funds from the payer’s account.

For example, you send money to a friend via Venmo. First, you initiate the payment on your Venmo app. The request goes through your bank to secure your funds. Next, the money is transferred to the receiving bank. Your friend’s account is credited, and they receive a notification of the payment on their Venmo app.

What’s important to note is that push payments, also known as real-time payments and instant payments, is that the funds are transferred immediately, and the payment cannot be reversed.

Benefits of APP transactions for consumers and businesses

Push payments offer more convenience for consumers and businesses. Since APP transactions are instant, there’s no payment delay, which makes them more convenient. Another benefit is that today’s consumers are already familiar with push payment apps like Apple Pay and Google Pay, which can result in higher transaction volumes. The benefit for merchants is that by receiving push payments they gain the surety that their goods or services are paid for in full before sending them to the customer. An additional benefit of authorized push payments is that they can reduce the risk of chargeback fraud as the banking customer themselves is actioning the payment.

What is authorized push payment fraud?

Unfortunately, new banking technology, like push payments, easily leads to new types of fraud. In this case, we’re referring to authorized push payment fraud. APP fraud can occur through different scams including social engineering (like romance scams and investment scams) and account takeover fraud.

Since these payments are instant and irreversible, it makes authorized push payments a prime target for fraudsters. They get their victim’s money immediately.

Regulatory measures and consumer protections for APP transactions

The industry regulators have different approaches on how to deal with APP fraud. In the U.S., victims of APP fraud are liable for the financial losses suffered from this type of digital banking fraud.

In the U.K., approximately 60% of APP fraud victims are reimbursed and the banks are liable for the fraud losses. However, the U.K. government has introduced technical security measures, such as Confirmation of Payee, to reduce the levels of this fraud. What’s more, the regulators are also considering including up to a four-day waiting period for these instant payments or real-time payments when a transaction seems suspicious.

How to protect customers from authorized push payment fraud

To protect banking customers from APP fraud, financial institutions should ensure they have a multi-layered defense against fraud. This ideally includes visible security, like a biometric scan, and invisible security like behavioral biometrics.

Using payments industry standards, like 3-D Secure, adds an extra layer of protection for online payments, reduces APP fraud attacks and delivers a smooth user experience.

Along with constantly educating customers about new digital banking scams, banks should also share fraud intelligence with the wider banking ecosystem to enable all stakeholders to collaborate and keep a step ahead of modern fraud.

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Authorized push payment (APP) | Payment fraud | Real-time payments