The Confirmation of Payee (CoP) story continues to unfold. After Pay UK’s 2020 launch of the bank account name-checking service with large banks, building societies and payment service providers (PSPs), it has gained traction among UK consumers as an effective defence against authorised push payment (APP) fraud. It has revolutionized account verification on its way to 99% coverage among banks due to mandates driven by the Payment Systems Regulator (PSR) and advocacy work by Pay UK.
Now, the focus has turned to more business-specific applications. Its most recent iteration and an extension of CoP, Payer Name Verification, was launched just a few months ago. By using bank-grade technology, receivables teams at all varieties of companies can ensure that the bank account details provided belong to the named business or individual, giving them greater confidence that applications like Direct Debit are set up by the actual account holder. This namechecking helps to lower the risk of an indemnity claim, where the payer can claim back their payment if taken in error or without authorisation. On the other side of the equation, payables teams can verify that the owner of the bank account receiving funds matches the payee’s details, ensuring payments are free of errors or fraud.
For all companies that “pay and get paid”, two factors derive the urgency behind CoP adoption. The first is bank mandates. In October 2022, the PSR announced two deadlines. The first directed larger banks to implement CoP before the end of Oct 2023. The second, a pool of about 400 banks and PSPs, were given a deadline of October 2024. This will increase the banks’ ability to respond to CoP requests and send requests to other banks to verify the beneficiary details before initiating a payment. The second factor in the case for urgency is found in a new wave of APP, CEO, and impersonation fraud as criminals have taken advantage of the uncertainties caused by the pandemic to pose as senior people in a company, requesting urgent funds transfers. With that urgency in mind, we’ve assembled a list of pain points that CoP addresses and use cases CoP enables as it continues to unlock efficiencies and create a better customer experience.
Pain points CoP addresses for banks in addition to mitigating APP fraud:
· Reputational Risks: Every time a customer loses money due to a scam or a mistaken payment, it can negatively affect a bank's reputation. By reducing these incidents, CoP helps protect that reputation.
· Operational Costs: Handling mistaken payments and fraud investigations can drain valuable resources. By preventing these incidents in the first place, CoP can help reduce the operational costs associated with fraud.
· Customer Confidence: Trust is essential in the banking sector. By offering an additional layer of security during payment setups, banks can increase their customers' confidence in the system, leading to greater customer retention and satisfaction.
· Data Quality and Accuracy: Over time, databases can have outdated or incorrect account information. CoP serves as an ongoing, real-time check to ensure that payee data remains accurate and current.
· Internal Processes and Training: Before CoP, banks might have had different internal processes for handling fraud alerts or mistaken payments. With the implementation of CoP, there's a more unified approach that can make training and process execution more streamlined.
Additional pain points for corporates:
· Reduction of Misdirected Payments: CoP reduces the incidents of payments going to the wrong account due to typographical errors or confusion over account details.
· Increasing Confidence in Digital Payments: Fraudulent transactions and scams can erode trust in digital payments. By adding an extra layer of security, CoP can help to build confidence in these systems, encouraging their use.
· Improving Traceability and Accountability: CoP makes tracing payments easier and holds the right people accountable. If the payee's information does not match the bank's records, the transaction can be stopped, making it easier to investigate potential fraud.
· Easing Dispute Resolution: When there are disputes over payments a system confirming the payee can help efficiently lower the risk of an indemnity claim. This is where the payer can claim back their money if taken in error or without authorisation.
Additional Use Cases for Banks:
· Corporate Payments: Companies that need to pay suppliers, employees, or partners can use CoP to ensure their payments go to the correct recipients. This assurance is particularly useful for businesses that frequently set up new payees.
· Regulatory Compliance: Implementing and using CoP helps banks comply with regulations aimed to prevent money laundering and other illicit financial activities.
· Direct Debits and Standing Orders: When setting up Direct Debits or standing orders, CoP verifies that funds get collected from the right accounts. This verification prevents collection failures and the need for manual corrections, as well as potential reimbursements from going astray.
Additional use cases corporates:
· Online Retailers: E-commerce platforms and B2B marketplaces can verify the identity of their sellers before processing payments.
· Non-profits: Any organisation that processes payments, including charities or non-profits, that wants to ensure that payments get transferred to the correct recipient can benefit from using CoP.
· Cross-Border Payments: All financial institutions can use CoP to verify the recipient’s name of an international payment, helping to reduce uncertainty and the risk of errors or fraud in cross-border transactions.
· Insurance Companies: Can verify the name of the policyholder or beneficiary before collecting funds or making payments, which could help reduce the risk of fraudulent claims.
· Healthcare Providers: Can verify the patient’s name and reduce the risk of fraud in medical billing and claims processing.
· Educational Institutions: Can verify the name of the student and reduce the risk of errors or fraud in tuition collections and payments or financial aid disbursements.
As you can see there’s more to CoP than APP fraud. In addition to CoPs effectiveness as a fraud prevention service it gives banks and businesses the additional benefits of improving operational efficiencies versus solutions that rely on manual processes and have limitations in accessing real-time data to carry out bank account validation checks. And with more banks adding it as an automated account verification service, expect the usage of CoP to continue to see gains among businesses as well as individual consumers.