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The design phase of Australia's innovative Confirmation of Payee service has been successfully completed, with new compliance requirements for firms from next year.
This landmark achievement was announced by Australian Payments Plus (AP+) and the Australian Banking Association (ABA).
The Confirmation of Payee service, once implemented, will allow individuals making payments to verify the account name associated with a bank-state-branch (BSB) and account number before finalising a transaction.
This verification step is crucial for reducing mistaken payments and scams, to which Australians lost $2.74bn in 2023.
What is included?
Key features of the new service include:
- Central Matching Service: A system will compare the account name entered by the payer with the account data held by the payee’s financial institution. If a match or close match is found, the name will be displayed to the payer. If there is no match, the account holder's name will not be shown.
- Joint Accounts: In cases where the payee's account is jointly held, only the name entered by the payer will be displayed, accompanied by an indication that there are other account holders. The other names associated with the account will not be revealed.
- Data Security: No central database will be created. Instead, all account data will remain securely with the bank or service provider.
'An important step forward'
"Developing a Confirmation of Payee solution is an important step forward for the industry in the pursuit of combatting scams and frauds,” said Lynn Kraus, CEO of AP+.
“We have engaged with over 50 community groups to ensure the solution has broad-based support, which will be vital to its success. At AP+, our mission is to unite people and technology to power better experiences, and I believe the Confirmation of Payee solution delivers on that promise."
Anna Bligh, CEO of the ABA, highlighted the significant investment by Australian banks in this new technology.
"Banks are investing $100m in this new service to give customers another important layer of protection against scammers. This will provide greater confidence that money is being transferred to the right person, not a scammer,” she said.
Bligh also noted that the service is a key component of the banking sector's Scam-Safe Accord, a set of world-leading safeguards aimed at protecting Australians' money.
AP+ has selected Swift to build and manage the central matching service that underpins the Confirmation of Payee system.
The phased rollout of the service is set to begin in 2024, with financial institutions needing to integrate the service into their banking platforms from early 2025.
Australia rules out UK-style approach
The news comes after comments earlier in the week in which Australian Treasury minister Stephen Jones rejected the idea of adopting a UK-style mandatory reimbursement model for scam victims, arguing that it focuses too much on compensation instead of prevention.
Speaking at the National Press Club, Jones criticised the UK's approach to authorised push payment (APP) fraud, saying it could incentivise scammers and place undue liability on banks for scams originating from platforms like social media.
Instead, the Australian government is focusing on drafting mandatory industry codes targeting key sectors such as banks, telcos and social media companies.
Under this model, victims would be compensated only in cases of gross negligence by these entities, with the aim of sharing liability across sectors and emphasising preventive measures.
The codes are expected to be introduced by 2025, alongside other anti-scam initiatives such as the Confirmation of Payee system.
Industry reactions are broadly supportive of the Australian approach, with experts agreeing with Jones that focusing on prevention and enhancing fraud detection systems is more effective than mandatory reimbursement.
