Reducing fraud and mitigating misdirected payments with CoP

Long live electronic payments! As opposed to cash, electronic payments offer a variety of benefits to businesses and consumers alike – they’re more transparent, cheaper to process, offer a better customer experience, and can be safer. Much, much safer than cash.

However, the risk associated with electronic payments is also much greater. As consumers are abandoning cash in favour of new payment methods, they’re not only at risk of losing their money, but also crucial personal data.

Fraudsters are not idle. They are well organised and innovative, with proceeds often funding organised criminal activities spanning from terrorism to drug trafficking.

Fraud is on the rise

Looking at the UK alone, Authorised Push Payment (APP) scams cost consumers GBP 479 million in 2020, according to UK Finance. APP fraud is when consumers and businesses are persuaded to willingly make large bank transfers to fraudsters that are pretending to be someone they’re not, like a loved one in danger/need, a government authority, or a boss etc. 

Huge sums can be transferred and dispersed within hours, which is why there is increased pressure on banks to impose security measures to better protect customers from fraud or error. One of those measures is Confirmation of Payee (CoP).

Here comes CoP

CoP is a name-checking service for payments that is aimed at reducing certain types of fraud and misdirected payments. Before this service was introduced, the payer would have to provide the Payment Service Provider (PSP) with the payee’s details, such as bank account number, sort code and name and the payment would be routed in accordance with the instructions given. But there was no way of reassuring the payer that their payment was being sent to the intended beneficiary.

Using new technologies, it is now possible to check the name linked to an account number using smart algorithms without causing a delay in the handling of the payment and without violating the privacy of the account holders.

Back in 2017, Dutch banks introduced a CoP solution (named IBAN-Name Check) in order to offer better protection to their customers. Now, nearly the entire Dutch market is covered by this service, resulting in an 81% drop in reported fraud/scams and a 67% drop in misdirected payments, according to the analysis of nearly four billion checks we have performed in the Netherlands.

Examples of success

Pay.UK also launched CoP in 2019 and the measure has been successfully implemented by several UK banks, building societies and other PSPs. Take, for instance, NatWest, one of the country’s largest banks.

NatWest has been at the forefront of developing a CoP service for its customers and, given that it handles one in four digital payments in the UK, the bank has placed immense importance on the development of a best-in-class service with a long-term direction. For NatWest, CoP is not just a way of giving consumers and businesses peace of mind – it also underpins the new era of open banking, where people have the confidence to move between banks and financial providers, knowing their money and data is secure.

CoP’s implementation in the UK has also come right in the nick of time. The COVID-19 pandemic has proven that having a fast and safe payment system is pivotal for addressing the challenges of the modern age. Standing proof of this is HMRC using NatWest’s CoP service to handle the delivery of thousands of Universal Credit payments after the pandemic started at the beginning of 2020.

To CoP or not to CoP

Since its UK debut, CoP has grown to encompass some of the largest banks, including Lloyds, NatWest, Ulster Bank, HSBC, Barclays, Santander and Nationwide, covering approximately 90% of all bank transfers in the country. Despite this, there are still gaps in the market, meaning that many customers are left vulnerable. These gaps pose a severe threat to the system as fraudsters are likely to increase their efforts to target and exploit the consumers that are banking with institutions that do not offer a CoP service. 

While the industry is debating whether CoP should become mandatory, public debate is set to cause quite some reputational damage to those not offering the service. The British media appears to have taken a 'name and shame' approach towards those banks which are 'letting us down in the fight against fraud'.

CoP for organisations

But, beyond the risk to consumers, businesses are also facing a new wave of APP, CEO, and impersonation fraud. Criminals have taken advantage of the uncertainties caused by the COVID-19 pandemic to pose as senior people in the company requesting urgent funds to be transferred.

CoP is essential in helping companies make better-informed payment decisions. By checking the payee’s name, account number and sort code of every payment, they reduce exposure to error and fraud. The same capability can also improve the customer onboarding process, with our research showing up to 90% fewer dropouts during onboarding.

COVID-19 has fuelled a payments fraud pandemic and many believe that things will slowly go back to normal, but it’s important to understand that payment fraud was rising long before. As the handling of cash decreases in popularity in favour of more convenient payment methods, fraud will also continue to tag along if security isn’t taken seriously. Progress has been made, yet much more can be done to close the gap and create a secure payments ecosystem globally. 

About David-Jan Janse

David-Jan Janse (CEO of SurePay) is a seasoned new business strategist with over 25 years of experience in business transformation, lean startup thinking leading to new value propositions. He loves to spot new business models based on innovation and customer behaviour. In 2016 David-Jan and Marcel Rienties founded SurePay, market leader in Confirmation of Payee.

About SurePay

SurePay is the leading provider of the Confirmation of Payee (CoP) service, an innovative, real-time name-checking solution that gives UK payers greater assurance that their payments are going to the intended recipient. SurePay’s CoP helps prevent payees from transferring money to the wrong person or business, whether by intent, through payment fraud, or unintentionally, through misdirected payments.