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The UK's Payment Systems Regulator (PSR) is directing around 400 payment service providers (PSPs) to implement confirmation of payee (CoP) to their customers.
The implementation will take place in two phases. A group of 32 payment firms will need to implement the name-checking service, both for the payer and the payee, by October 31, 2023.
This group includes fintechs such as Revolut, as well as large banks such as Citibank, Bank of America and Deutsche Bank.
According to the agency, this will increase the current CoP coverage of 92 percent of Faster Payments transactions to 99 percent.
The rest of the financial institutions that participate in Faster Payments or CHAPS will be required to offer the fraud-fighting tool by October 31, 2024.
“This direction is another big step in protecting people from the devastation that APP scams can inflict on people,” PSR head of policy Kate Fitzgerald said.
“Financial firms have to act to prevent fraud and CoP is one of the many tools that can be used. By giving this direction, we will see more widespread adoption of the protections available to people making payments,” she added.
The phased approach will give industry time to plan and coordinate delivery more effectively, according to the PSR, especially to avoid bottlenecks, and allow Pay.UK to make the necessary changes to the CoP rules and standards in relation to a vendor model and indirect access model.
As CoP rolls out more broadly, “all payment service providers have a legal and moral responsibility to seize the opportunity to embed CoP within the customer's journey”, Ed Adshead-Grant, general manager and director of payments at Bottomline, commented on the announcement.
“There's no logical excuse to delay,” he said, explaining that “the markets are ready, and the technology is available with well-practised blueprints and processes to quickly achieve results”.
“Meet the deadlines or face compliance failures and unlimited PSR penalties.”
Consumer association Which? has gone even further by saying that firms “who are in a position to implement CoP measures now, shouldn’t wait until the set deadline”.
Although the announcement has been welcomed by stakeholders, Adshead-Grant noted that there are still parts of the market uncovered.
For example, pension funds, which were not included in the scope of this broad rollout, could be mandated to enable CoP, which could accommodate some of the most vulnerable account holders in the UK economy.
“So, the industry's drive to curb APP fraud must persist,” Adshead-Grant stressed.
The CoP service is designed to prevent accidentally misdirected payments and authorised push payment (APP) scams by checking the name of the account holder with the account number and sort code.
The PSR is also set to introduce rules that require banks to reimburse defrauded customers in all but exceptional cases. Current statute does not allow the PSR to mandate such a reimbursement but the UK’s upcoming Financial Services and Markets Bill is expected to fill this gap.
The PSR said the agency “is ready to act fast” on APP fraud once the bill passes into law.
Which? called the proposal a “gamechanger”, while stressing that “[w]ith fraud continuing to soar, those changes can’t come soon enough”.
