Bank customers will be warned if the name of someone they are trying to pay does not match the account details – in the latest step to combat scams where people are tricked into transferring money to a fraudster.
Payments body Pay.UK has unveiled details of how the new “confirmation of payee” service will work.
Currently, the account name is not checked when sending an electronic payment – but under the new service banks will check the name on the account when someone is setting up a new payment or amending an existing one.
Consumers will be warned if the details do not match up – which should help prevent payments being made to fraudsters or simply when a mistake has been made.
Banks, building societies, and other payment providers will be able to roll out confirmation of payee during 2019 as a way for their customers to check who they are paying.
Consumer group Which? welcomed the move – but said customers will wonder why banks have “dragged their heels” and not put it in place before.
Pay.UK said the move will reduce the risk of errors and certain types of fraud, such as malicious redirection invoice scams where, by posing as a legitimate business known to customer, people are convinced to redirect a payment to an account controlled by a fraudster.
It is part of wider efforts to combat authorised push payment (APP) fraud – which happens when people are tricked into making a bank transfer directly to a criminal.
Victims can end up losing huge amounts of money because their bank made the transfer on their instructions – unlike in cases when when payments are fraudulently made without customers’ authorisation and banks are generally obliged to give a refund.
Paul Horlock, chief executive of Pay.UK, said: “Sending a payment with an incorrect sort code or account number is like addressing a letter with the wrong post code.
“Even if you have used the correct name it won’t reach the intended destination – and fraudsters have become increasingly sophisticated in using this to trick people into sending money to the wrong account.
“Confirmation of payee will let you check you have the correct name for the person or business you’re paying, giving better protection against certain types of fraud, and helping to stop accidental mistakes too.”
When someone is setting up a new payment, if the name matches, there will be confirmation of this – which could be a green tick, for example.
If the name does not match, it is then up to the sender to decide whether or not to proceed with the payment – but the risks will have been made clear to them beforehand.
Alongside these changes, a new industry code is being developed which could help victims of APP fraud get their money back when they have shown a requisite level of care.
Someone who makes a payment despite being told the name does not match may risk not being judged not to have taken due care – potentially making it more likely they will never see their money again.
There will be some scams which confirmation of payee cannot address – such as when people are tricked into paying up-front for goods which never arrive.
Figures from trade association UK Finance show that in the first half of 2018 consumers lost £92.9 million because of APP fraud.
Account providers have previously been criticised for not doing more to shoulder the burden when victims lose money as scams become increasingly sophisticated.
Pay.UK was previously known as the New Payment System Operator.
Gareth Shaw, Which? money expert, said: “It’s right that banks and building societies have finally been forced to introduce this much-needed check at the point of transfer. However, customers will wonder why banks have dragged their heels and not implemented this system years ago, as it could have prevented a significant amount of fraud.
“With losses to bank transfer fraud increasing drastically it’s clear this measure can’t come in soon enough.
“While we await its introduction, it’s crucial that an agreement is reached on the funding mechanism to reimburse all victims of bank transfer fraud who have been left out of pocket through no fault of their own.”