Making a one-off manual bank transfer can be nerve-wracking – you really don’t know for certain where your money is going.
However, technology is soon to arrive in New Zealand that will provide extra confidence and security for online bank transactions.
Known as confirmation of payee (CoP), this service tells you whether the bank account number you’ve entered is a match with the name. It cross-references the account number and name and provides you with a risk rating. If it rates the payee as a ‘match’, you can have confidence that the account is connected to the name you’ve entered.
If it rates the payee as a ‘close match’, you might have made a typo on the name or the initial might be incorrect. If the payee is rated as ‘no match’, you’ll get a warning to proceed only if you’re certain you are paying the correct person or business.
The cost of sending money to the wrong person can be high. In the best-case scenario, it’s an honest mistake, which requires you to contact your bank, which will contact the payee’s bank, and that bank will contact the payee, who will hopefully return your funds. It’s inconvenient for you, the accidental recipient of your mistake, and both banks.
Confirmation of payee can help prevent this by flagging that the details you entered don’t match who you intend to pay.
In the worst-case scenario, your money is lost to fraud, never to be recovered. Now the technology can help you spot a dishonest transaction. For example, if you were about to make a payment for a toll charge, this technology might flag the payment and display the following warning ‘Caution!’ This account is not a road toll company”.
It can also tell you whether the account you are paying is a personal account or a business account. If you are expecting to pay a business account but it comes up as a personal account, this would be a strong indicator that you might be a victim of fraud. You can then decide whether to continue with the payment.
“There’s really no downside to cross-checking payee details – it provides a clear advantage to everyone,” says Jack Gordon, Key Account Manager Financial Institutions at payments experts Worldline, the people who brought EFTPOS to New Zealand. “It will reduce legitimate errors, saving time and money for everyone. It will reduce scams, which are hugely stressful and expensive for our entire economy.”
Scams cost Kiwis almost $200 million in 2022, according to a recent MBIE report, so this innovation should have widespread benefits for all New Zealanders. Even when there’s a low risk of fraud, a CoP check can make life easier for everyday buyers and sellers.
“I sold my car recently and the buyer paid me directly. He was very nervous making the payment online. He kept checking the account number with me over and over,” Gordon says. “It will be fantastic to have a simple check that will take some of that fear away.”
Reducing fraud since 2017
SurePay, the market leading creator of Confirmation of Payee services, already has a system that provides payee checks in the EU and the UK. It has performed over 6.5 billion checks since it launched in 2017 in Europe. It has resulted in an 81 per cent reduction in fraudulent payments to local banks accounts and a 67 per cent drop in misdirected payments.
From all checks completed to date, 5.5 per cent of results are no matches. When put in context – this means of 6.5 billion checks, 357.5 million have been “no matches”, either through user input errors or fraud and scams.
Worldline is working with SurePay on bringing this system to Aotearoa and is looking to work with banks to introduce checks to everyday transactions for individuals and companies.
“This is tried and tested technology,” Gordon explains. “The algorithm has been honed to get it right, so we know it will work successfully for local banks. There’s an immediate benefit for consumers and banks by introducing it.”
He says Worldline hopes to launch the CoP service in 2024. The technology can be deployed rapidly because it is well established, documentation exists and it’s essentially ready to go.
The future of international payments
Two weeks ago, the European Union outlined that payment providers ‘immediately and without any additional charges or fees’ provide a service to verify the identity of a payee to whom the payer intends to send a credit transfer – which points to it eventually becoming the global standard.
Lagging behind on payment security technology could lead to New Zealand becoming a favoured target for fraudsters; financial losses here from cybercrime rose 66 per cent in the first quarter of 2023, according to CERT.
Worldline will look to introduce a system that will start with local transactions, with cross-border payments following. The Worldwide application of CoP would also help prevent the kind of high-value corporate cybercrimes that have led to substantial losses for organisations – particularly invoice fraud.
In the meantime, payee checks on online payments allows banks to go one step further in protecting customers’ funds.
“This adds another layer of protection for anyone making online payments,” says Gordon. “There are no privacy concerns because no personal information is shared. Customers don’t need to do anything, because we will workbehind the scenes with the banks to make it happen. Customers still have the ultimate choice on whether they make a payment, but this gives them another tool to help make that decision.”