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A confirmation of payee system has been launched to reduce the risk of payments being sent to the wrong account.
Editor at Credit Strategy. Previously held roles at Accountancy Age, Accountancy Daily and the Leicester Mercury.
Currently, the account name is not checked when sending an electronic payment, while authorities have warned that fraudsters are increasingly sophisticated in tricking people into sending money to the wrong account.
The proposal comes from the UK’s retail payments authority – formerly known as the New Payment System Operator (NPSO) – which has rebranded to Pay.UK. The move follows the recent consolidation of the UK’s three retail payment schemes (Bacs, Faster Payments and the Cheque and Credit Clearing Company) into the NPSO.
Under the confirmation of payee system, customers setting up a new payment, or amending an existing one, will have the name on the payee account checked by their bank. There are three possible outcomes: Yes; No, please check and; No, the name is wrong.
If customers have entered the wrong name for the account holder, they will be told the details do not match and will be advised to contact the person or organisation they are trying to pay.
The matching decision is made by the intended recipient’s bank, as they have the best knowledge about the name of the person or business that is being checked. No matter what the outcome of the name check, the decision on whether to proceed with a payment will always rest with the sending customer – with the risks made clear if they choose to go ahead after receiving a non-match.
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 the name of who they are paying.
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.”
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