Intentionally paying unintended beneficiaries. If there’s a phrase that captures the current state of payment fraud in the UK, that would be it. Authorised push payment (APP) scams continue to challenge consumers and businesses as well as their financial institutions and payment service providers. According to UK Finance, there were 195,996 incidents of APP scams in 2021, adding to losses of £583.2 million. Advancements in the detection and prevention of card fraud have pressured bad actors to find new vulnerabilities. APP has been their destination of choice.
If there’s a phrase to balance the one that opened this post, it’s Confirmation of Payee (CoP). As the pandemic drove rapid change and isolation for consumers and businesses, fraudsters took full advantage and accelerated fraud of all types.
CoP was triggered by a “super complaint” filed with the Payment Services Regulator by consumer advocacy group Which? In September 2016. It called for banks to better protect customers tricked into transferring money to a fraudster and made it clear that banks and their customers needed more information to wage a fair fight. Fast forward to 2020 when Pay.UK launched CoP with the UK’s six most prominent banking groups. For APP fraud, the Pay.UK-generated name-checking overlay service has provided a first line of protection for banks and their customers.
CoP, a once-in-a-generation change in how UK bank accounts are verified, has already proven itself as an effective method of preventing APP fraud between participating banks. By October 2022, 59 banks were live with CoP covering 92% of UK Faster Payments, and the Payment Systems Regulator (PSR) continues their drive to extend coverage further by issuing more mandates. By October this year, the PSR suggests that over 90 financial organisations will be participating in CoP, covering 99% of UK Faster Payments, and moving to close to 450 by October 2024.
I’m sure most people will have used CoP in their personal lives when making payments through internet banking or banking apps. But what about payments initiated outside of the bank’s systems? And what are the broader challenges this brings businesses?
For any company, the most cost-effective time to verify customer and supplier information is when they provide it. Post covid, that’s most likely via a phone app, an internet page, or a call centre, but it could even be face-to-face in a store. The key thing is that the customer remains engaged and that the company can correct any errors encountered. And that challenge applies equally to verifying payees as much as any other essential piece of data that will catch potential fraud and human error before it’s too late.
In its work to understand how businesses can best interact with CoP, Bottomline interacted via roundtables and webinars with hundreds of companies and uncovered several perceived challenges:
Account coverage has a direct impact on onboarding costs. Data coverage is frequently cited as a frustration as this has a direct impact on the cost of onboarding new customers. The manual processes implemented to mitigate the challenge of verifying payee accounts that can’t be checked can be costly, are often less reliable and increase the likelihood of attrition. Business accounts specifically, where match rates have been particularly challenging, often deter businesses from implementing any sort of electronic checks at all.
The supplier onboarding and update processes are manual in many cases. Supplier checks are often not integrated into business systems as there is a challenge prioritising this vs BAU activities. Many companies still use costly third parties for bank account validation and verification, or manually check bank accounts when they onboard a new supplier or change existing payee details. Even worse, supplier accounts are sometimes put on hold if there appears to be an account issue, threatening an otherwise good relationship and potentially risking issues related to the UK’s Prompt Payment Code.
Integrating technology within existing systems can take time and effort. Some companies are replacing legacy systems and upgrading their ability to automate payment processes. There is a concern that when it comes to customer experience, the onboarding process needs to be as slick as possible, and companies should be cautious about adding steps when meeting deadlines. However, an automated solution implemented via an application programming interface (API) would be a welcome, necessary step rather than one seen as a hindrance.
Companies can overcome all these perceived challenges by working with the right partner to help combine a digital business payments platform with new and upcoming overlay services like CoP. You can bet those fraudsters, rather than your customers, will be the ones challenged and your funds will indeed reach their intended recipients.
As a CoP participant, Bottomline Payment Service Limited leans on the SaaS-based technology developed by parent company Bottomline Technologies to deliver a straightforward API, allowing its customers to verify payees at the point of data capture or change, giving greater confidence that the bank account details are 100% correct right at the start of the process.