What is Confirmation of Payee?
Fighting back against bank transfer fraudsters
Confirmation of Payee is a new system to be used in online banking that will make the recipient’s name as important as their sort code and account number when making a payment. That means when you make a payment to someone, you’ll need their full name or official company name as stated on their bank account, as well as their bank details.
Currently, only the recipient’s bank account number and sort code are needed, and while this check ensures that the payment will be sent to an existing bank account, it doesn’t confirm whether that’s the bank account you really mean to send money to. In practice, Confirmation of Payee will cut down heavily on scammers who pose under other people’s names to steal money.
Why is Confirmation of Payee necessary?
The main aim of Confirmation of Payee is to cut down on APP (Authorised Push Payment) fraud. This is one of the most common types of fraud in the UK, totaling around £200 million stolen in 2017. (1) In an APP scam, the fraudster convinces a member of the unwitting public to send them money, by posing as their bank, a legitimate company, or similar, and providing their own bank details for the payment. The victim sends their money, and the scammer disappears. It can be very tricky to get a refund from the bank in such situations because despite not knowing the owner of the account, the customer sent their money willingly – leaving them liable.
Confirmation of Payee won’t be a bulletproof fix for APP scams, as fraudsters could still use their real name and convince victims they work for Barclays (for example) under that name. But, the number of successful scams will still be slashed dramatically.
As well as scam avoidance, Confirmation of Payee will be useful in preventing simple bank transfer errors. It’s very easy to get a digit or two wrong when entering a bank account number and accidentally transfer a chunk of money to the wrong person. If that money goes to a complete stranger, it’s unlikely your bank will refund you, as you willingly transferred the money and weren’t a victim of theft. Confirmation of Payee will allow you to double-check you’re sending money to the right place.
After Confirmation of Payee is implemented, any banks that don’t check names against bank accounts may be held liable for any money lost in such scams and mistakes and will have to refund their customers.
How will it work?
Once Confirmation of Payee is rolled out, when you make or amend a payment you’ll be prompted to enter the name of the person receiving the payment as well as their bank account number and sort code details. Depending on if the name is correctly matched to their account, you’ll get one of three options:
- If you’ve used the correct account name to set up the payment, you’ll see a confirmation screen and the payment will go ahead.
- If you’ve used a name that’s similar but doesn’t quite match – such as a different spelling of a common name or a typo error – you’ll be shown the actual name attached to the bank account, and asked to confirm if that’s the recipient you mean.
- If you use the wrong name, you’ll be advised that the details don’t match and prompted to contact the person you’re attempting to pay.
Luckily, this level of communication between banks should be straightforward to implement due to the new Open Banking framework.
When’s it coming?
Confirmation of Payee was proposed in 2017, with plans for the system to be launched in early 2019. However, it has more recently been delayed until 30th June 2020. This was due to concerns raised by smaller banking providers that they didn’t have the resources to make and test the changes in time for the initial deadline, and because of the additional workload incurred by larger banks too. In response, Pay.UK – the operator behind the Confirmation of Payee proposal – moved the deadline and agreed that the name-checking guidelines should only apply to larger banking providers such as Barclays, Halifax, and Lloyds, which cover 90% of online banking transactions. At the time of writing, Confirmation of Payee will be launched in June 2020.
Visit the UK Finance fraud updates and downloads pages here.