Confirmation of Payee – what is it?

When we are asked to create a payment instruction either for our company or ourselves we are typically asked for bank account name, sort code, account number and the name of the beneficiary. The assumption is often that the “system” checks that the details are correct before allowing the payment to proceed.

We know anecdotally that this is not correct as it does not prevent CEO fraud or payment scams where people are contacted and asked to transfer sums to a new account in their name (also known as Authorised Push Payment (APP)).

Background

Going back to 2015, Payments UK (now Pay.UK) wrote a report “World Class Payments in the UK - Enhancing the payments experience”. The report set out what developments were needed to the UK payments infrastructure to ensure it remained fit for purpose. One of the requirements was the ability to create a three-way match between the beneficiary name, the sort code and the bank account number. In addition to combatting fraud, it was seen as reducing the chance of accidently paying the wrong person / company and then hoping they would repay the funds.

What is Confirmation of Payee and how does it work?

Confirmation of Payee is a name checking service. When setting up a new payment, your payment provider will be able to check the name of the person or organisation you give, against the actual name held on the account.

There are three possible outcomes:

  • Yes - If you used the correct account name, you will receive confirmation that the details match, and can proceed with the payment
  • No, please check - If you used a similar name to the account holder, you will be provided with the actual name of the account holder to check. You can update the details and try again, or contact the intended recipient to check the details. (For example, a payment to HMRC may come back as HMRC Shipley Another example could be a payment to PwC which comes back as PricewaterhouseCoopers LLP. In both cases you’ll be required to check that this is indeed the account you expected to pay)
  • No, the name is wrong - If you have entered the wrong name for the account holder you will be told the details do not match and advised to contact the person or organisation you are trying to pay
What payment types will use the new service?

At the moment the service is focusing on “push payment” transactions, which are payments that you initiate and authorise from your account – usually internet or phone payments. Bacs payments including Direct Debits are not included for the time being; however, Pay.UK will consider whether the service can be extended to other payment providers and payment types in future.

Where are we now?

The original deadline for implementation set by the Payment Systems Regulator (PSR) was

  • 1 April 2019 for providers to be capable of receiving and responding to CoP requests; and
  • 1 July 2019 for providers to begin routinely to send CoP requests and present the responses to customers.

Given the effort required on the part of the banks as they install new systems to check payee names alongside bank account numbers and sort codes, the PSR has extended the deadlines to 31 December 2019 and 31 March 2020 respectively.

Thus, the PSR, leveraging its regulatory power, is first demanding that by 31 December 2019 Lloyds, RBS Natwest, Barclays, HSBC, Nationwide and Santander each has the capability to notify the sending bank that a payment is unmatched, requiring inter-communication between all of the 6 banks. By March, the banks will have an obligation to send confirmation of payee requests and notify the payer of the outcome, whether matched or mis-matched.

What does this mean for a Treasurer

As noted above, bulk payments (such as BACS) is currently out of scope, so CoP only impacts Faster Payment or CHAPS payments. Treasurers will need to be aware that depending on their clearing bank(s), CoP will be start to be deployed in 2020. Anyone in their organisation responsible for making these types of payments will need to be educated to understand what a part-matched and unmatched payment response looks like and what actions they need to take.

  1. Ensure that you’ve been in touch with your clearing bank to understand how they are preparing for CoP
  2. Make sure you’ve identified all of your payment teams that may be affected
  3. Ensure there is a training plan in place to help your payment teams understand the changes that are coming and what actions they may need to take.

The ACT Policy and Technical Team has been accepted as a member of the CoP Phase II Advisory Group. If you have any issues you’d like to raise with Pay.UK, please contact technical@treasurers.org

 

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