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Learning from successful introduction of account verification services in UK and Netherlands, Belgium introduces bill to mandate a similar anti-fraud tool. Meanwhile, Bank of America launches Account Validation in the U.S.
A new bill introduced last week in Belgium's Chamber of Representatives aims to reduce fraud and misdirected payments made through online banking channels by requiring banks to allow their customers to verify the name of the IBAN account holder to whom they intend to send money. The new tool would alert the users if the name entered in the beneficiary field differs from the name of the account holder. It is, however, at the discretion of the users to decide whether they proceed with the payment after seeing the warning or not.
According to the bill, the introduction of these new account safeguards follows the successful rollout of similar services in the United Kingdom and the Netherlands.
The Netherlands introduced its IBAN-Name Check service in 2017. The product initially developed by Dutch bank Rabobank was later spun off into a new start-up company called SurePay in 2020. SurePay provides both the IBAN-Name Check to Dutch banks and the Confirmation of Payee (CoP) service in the UK.
According to its website, it processes 3.8m account checks per day in the Netherlands across 30 banks, or over 4 billion checks since launch. It claims that this has resulted in an 81 percent drop in reported fraud and scams, and a 67 percent drop in misdirected payments (i.e., when a payment is accidentally sent to the wrong bank account).
Although the UK Payment Systems Regulator (PSR) has recently concluded that CoP has had a positive impact in the country as part of its initial phased rollout, the feature alone will not be enough to eliminate fraud, the regulator previously told VIXIO.
According to the latest data, banks register 1m CoP requests in the UK every day, which is equivalent to roughly 14 percent of the Faster Payments transactions that these banks process.
The regulator hopes to increase usage of CoP as part of the next phase of market rollout; however, the challenge to address is significant. APP fraud grew to record levels in the first half of 2021. According to a UK Finance report, there was a 71 percent increase in this type of scam, causing consumers £355m in losses in the first half of 2021 and overtaking card fraud losses for the first time.
The payment scheme company Pay.UK told VIXIO, “while Confirmation of Payee is not a silver bullet to eradicate APP fraud, it is one of a range of measures being implemented by the industry to combat fraud”.
Most APP fraud in the UK occurs across Faster Payments. The speed and irrevocability of the payment, once it has been sent, has made this service a particular target for fraudsters.
Belgium banks launched instant payments services in the country in 2018, supported by 11 banks. This meant, from the start, more than 90 percent of Belgian payment accounts became reachable through new instant payments services. The fast development of instant payments in the country is no doubt a significant consideration for the new bill.
US also pushing ahead with customer verification
Meanwhile, in the United States, the National ACH Association (Nacha) has implemented rules that require businesses that initiate consumer ACH debits via the internet or mobile devices to verify the consumers’ account information for the first payment. The rules took effect on March 19, 2021, but Nacha said it would not enforce the rule for an additional period of one year from the effective date.
The latest to announce the implementation of the Account Validation service is Bank of America, who now provides the service for corporate and public sector clients. The new feature allows users to verify the status of an account and authenticate the account owner before initiating an electronic credit or debit payment. At the same time, the new service could help companies to comply with the Nacha WEB Debit Account Validation rule.
Bank of America's Account Validation is supported by Early Warning Services, a fintech company that provides identity, risk and payment solutions to financial institutions, and is owned by Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank and Wells Fargo.
Early Warning Services is also the company behind popular mobile P2P instant payment service Zelle.
