UK system offers way to crack down on bank scams in NZ

Kiwi consumers are losing nearly $200m each year to fraudsters, says watchdog

Aconfirmation 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 (NZBA).

How confirmation of payee works

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

Worldline executive Bruce Proffit told the Herald that 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” — or, specifically the so-called “authorised push-payment scams” that have cost Kiwis a staggering $198 million in the year to September 2023, according to an MBIE survey that drew data directly from our major banks.

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 there should be