Tech Insurance for Payments Companies (The 2025 Guide)
- Steven Barge-Siever, Esq.
- Jul 31
- 4 min read
How to protect your platform, partners, and board - and avoid regulatory landmines.
Why Payments Companies Face Unique Insurance Challenges
Payments companies sit at the intersection of technology, money movement, and regulation, which makes them one of the most complex fintech verticals to insure.
Whether you're enabling B2B transactions, offering embedded payments, or white-labeling merchant services, you're taking on risk from all sides:
Tech failure? You’re on the hook.
Compliance miss? Expect scrutiny.
Partner breach? Liability might still flow upstream.
First and foremost, we acknowledge that insurance is both a formality to payments tech companies generating revenue and working with financial institutions, as well as a financial backstop.
But most policies aren't built for platforms that move money, plug into banks, or handle KYC. If your broker doesn't understand that, you're likely buying a false sense of security.
When Should Payments Companies Should Buy Insurance
Trigger Events:
Signing a banking-as-a-service (BaaS) agreementPartnering with a sponsor bank shifts compliance burdens onto your platform, but also introduces shared liability.
Many BaaS contracts include indemnity and audit rights that can trigger D&O, E&O, or regulatory coverage needs.
If your system fails or your oversight lapses, you could be liable for your partner's regulatory exposure.
Launching a new payment flow or embedded finance featureWhether you're embedding credit, issuing cards, or enabling payout APIs, you’ve just added a new failure point.
Misrouted funds, logic errors, and faulty API calls can result in claims from merchants, users, or partners.
Each new payment path introduces new insurance needs, especially for Tech E&O and Crime.
Taking on merchant onboarding, funds handling, or KYCIf your platform controls onboarding or manages KYC/AML, you’ve effectively taken on regulated functions, and the liability that comes with them.
If a fraudulent merchant gets through and later causes losses, your platform may be liable.
You need Crime, Cyber, and E&O with affirmative language around onboarding and fraud controls.
Adding a board member, raising VC capital, or partnering with an enterprise clientSophisticated parties will expect coverage to be in place, especially D&O, Cyber, and Tech E&O with meaningful limits and reputable carriers.
VCs don’t want to take a board seat without protection.
Enterprise clients don’t want to risk integration with a vendor that lacks insurance.
Waiting until a partner demands insurance is too late. You should structure your insurance based on data flow, funds movement, contractual obligations, and legal risk - not just procurement checklists.
Our suggestion - rather than chasing it down when you are trying to close a contract, buy it before you are negotiating. This will save you money (insurance premiums are tied to revenues) and time.
And when you are in the insurance procurement process, structure coverage based on data flow, funds movement, and legal risk, not just the procurement checkboxes. Many founders just want it done, and we get it.
But it takes the same amount of work to get it done right.
Note on the Process: Applications
Every insurance company needs an application to give you quotes. Fill out this one for tech E&O, this one for standalone Cyber, and this one for everything else - these applications are accepted by all insurance carriers.
Send it to your broker, send it to us, you will have quotes from multiple carriers in a few days (from us).
Core Coverages for Payments Companies
1. Tech E&O (Errors & Omissions)
Covers liability arising from your platform's failure to perform - outages, bugs, broken APIs, failed payment instructions.
Payment-specific twist: Missed transactions, duplicate payments, processing delays, and regulatory breaches tied to core functionality.
Covers breaches of data (PII, PCI, banking credentials), ransomware, and related liability.
Payment-specific cases: Stolen cardholder data, synthetic identity fraud, credential stuffing attacks, and chargeback fraud triggers.
Protects executives and board members from personal liability tied to regulatory investigations, fundraising, mismanagement, or compliance lapses.
Payments angle: If your risk committee misses a gap in your OFAC procedures, the claim hits the board.
Covers internal fraud, theft of funds, and social engineering losses.
Payments-specific scenarios: Fake ACH instructions, internal manipulation of payout systems, vendor impersonation attacks.
5. Regulatory Endorsements
Many payment firms operate in gray areas of licensing or rely on bank partners. These endorsements carve back coverage for:
Regulatory defense (e.g., CFPB, FinCEN, state AG)
Claims tied to lending functionality, even if you're not a direct lender
Common Mistakes in Insuring Payments Platforms
Assuming a tech E&O policy is built for financial services. Most are not, and unless your broker negotiates specific coverages for payment, and regulatory carve-backs, you’re likely uncovered.
Forgetting about first-party theft. Crime losses often come from insiders or vendor impersonation, not external hackers.
Not covering partner risk. If you rely on third-party KYC vendors, PSPs, or middleware, their failure can still cause claims against you.
Buying cheap Cyber with a shared limit. Cyber must stand alone. Payments companies need robust breach response capabilities.
How to Structure Coverage by Stage
Stage | Must-Have Coverages | Why It Matters |
Seed | Cyber, D&O (low limits), Crime (if active ops) | Early product launches often expose real data |
Series A | Tech E&O, D&O, Cyber (higher limits), Crime | Fund movement, bank partners, VC governance |
Series B+ | All above + EPL, layered E&O/Cyber, Endorsements | Regulatory scrutiny rises with scale |
Questions to Ask Your Broker
Have you worked with companies that move funds or integrate with banks?
Do we have coverage for payment instruction errors and regulatory investigations?
Is our E&O customized to reflect merchant liability and KYC/AML failures?
What happens if a partner like Synapse, Stripe, or Alloy fails?
Final Word: You’re Not a SaaS Company - Don’t Buy SaaS Insurance
Payments companies carry regulatory exposure, funds movement risk, and reputational damage that standard tech startups don’t.
You need an insurance program that matches that risk, with the right endorsements, limits, and language behind it.
Talk to us:
Steven Barge-SIever, Esq.
