Confirmation of Payee: A Step Towards Even More Secure Payments

Required knowledge

• In-depth knowledge of end-to-end payment processing
• Basic insights into payment validation processes

With financial transactions happening in seconds, protection against fraud and erroneous transfers is more important than ever. “Confirmation of payee” (CoP) makes it possible to verify the name of the beneficiary against the account information on file with their bank before the payment is initiated. This ensures that payments go where they are supposed to go and do not end up in the hands of fraudsters or in the wrong account due to input errors. The service and its name originate from the British banking sector.

How Does CoP Work in the UK?

When a debtor wishes to transfer a payment (Figure 1), it is prompted to enter the beneficiary’s name and account number. CoP compares the name entered with the name on file with the beneficiary bank. Based on this verification, the debtor will receive one of the following responses:

• a) full match
• b) partial match
• c) no match
• d) verification not possible

These responses allow the paying party to identify and correct potential errors or fraud attempts before the payment is executed.

Why Is CoP Important?

• Protection against fraud CoP is an effective measure against fraud, for example when criminals have swapped IBANs in otherwise legitimate payment requests.
• Error prevention Even small typos can result in money being sent to the wrong account. With CoP, the debtor can detect and correct such errors before they happen.
• Increased confidence Knowing that there is an additional layer of security increases customer confidence in online payments, especially instant payments.

Pan-European Perspective

While CoP is already widespread in the UK, the path to a standardized European IBAN/name validation approach is not yet complete. The EU Commission’s proposed directive, also known as the Payment Services Regulation (PSR), requires payment service providers (PSPs) to implement a CoP service within a specified period after the legislation comes into force. The main concerns of PSPs regarding the proposed regulation are as follows:

• The IBAN/name verification only covers a fraction of the possible fraud scenarios.
• The basic check already prevents typing errors.
• The proposed timetable is difficult to manage.
• Implementation costs are high.
• To be effective, providers need to achieve cross-border reach across multiple standards and approaches.
• Long or complex beneficiary names may result in “no match” cases, even if the correct person is meant.

With the advent of instant payments, which allow instant transfers, CoP could become more important globally as the service further enhances the security of this fast payment method.

Peter Ruoss  
Product Owner Payment Software Partners, UBS Switzerland AG