UK system offers Kiwi banks a way to crack down on scams

A confirmation of payee (CoP) system that would make it harder for fraudsters to scam Kiwis could be a step closer with a payments provider pitching a solution it says is proven in the United Kingdom.

In 2017 Worldline, formerly known as Paymark, partnered with a firm called Surepay to launch a confirmation payee service in the UK.

Since then it has performed over 6.5 billion checks resulting in an 81 per cent reduction in fraudulent payments to local bank accounts and a 67 per cent drop in misdirected payments. Worldline has now pitched it to New Zealand’s major banks through the New Zealand Banking Association.

How confirmation of payee works

It works like this: If you believe you’re about to make a payment to Jane, but the account you are sending money to is registered to Mr A Naughtyman the CoP process will flag the discrepancy before you make the payment.

Worldline executive Bruce Proffit said CoP will also throw up a red flag if you think you’re paying a company but the recipient’s bank account is held by an individual.

It can also raise a yellow flag if a name is a letter out, or an account number a digit wrong, helping to prevent a fat-fingered transfer of funds to the wrong account.

Netsafe thinks a “confirmation of payee” or a service that matches a name to an account number when you put through an online bank payment would help thwart fraudsters.

Consumer NZ calls CoP system “a simple step that will stamp out scams”.

The so-called “authorised pushpayment scams” have cost Kiwis $198 million in the year to September 2023, according to an MBIE survey.

Confirmation of payee ‘overdue’

“This should have happened years ago,” Consumer chief executive Jon Duffy told the Herald.

“New Zealand consumers are losing nearly $200m a year from scams — many of which should be prevented by known fraud prevention measures.”

Duffy said banks had heavily invested in protections around unauthorised fraud — such as when someone steals your credit card details then racks up charges — because they were on the hook to repay the victim. Making banks liable for authorised payments where fraud is involved, as in the UK, would focus minds, Duffy said.

But he added a bank should not be on the hook if a customer had been negligent.

So what do the banks think?

The major banks’ position remains: We think CoP is a good thing and we will implement it, but there are several tricky elements and we can’t say when. “Implementing a confirmation of payee service is a key priority for the industry,” NZBA chief executive Roger Beaumont said.

The solution will also need to comply with privacy law, he said.

Banks have already taken steps to increase their anti-scam initiatives Beaumont said, including expanded anti-fraud teams. a

Speeding things along

Proffit said there were two ways of implementing a confirmation of payee system.

One was an application programming interface-based solution that let banks share name and account information in real time. That would address the concern that some customers have about a CoP system delaying transactions. But getting banks who have different customer management systems — of varying ages — to talk to each other would be complicated and likely expensive.

An easier, cheaper way — if customers tolerated delays as a trade-off for safer banking — would be for a provider like Worldline to take a copy of each bank’s customer name and account number database each day.

While the NZBA mulls alternatives, Netsafe has teamed with Akahu and Dolla, to offer an app-based confirmation of payee service. Akahu offers a “confirmation of payee” service that matches account names and numbers, which is free for individuals who make payments through its app.