New regulations set to come into force this year should make the process of making online payments safer by stemming the chances of fraud taking place.
So, what is this new system?
Enter, Confirmation of Payment
The Confirmation of Payee system will mean that anyone making a payment online will be alerted if the name used does not match the account. The aim of Confirmation of Payee system is to cut down on authorised push payment (APP) scams, where victims are tricked into sending money to another account.
Regulators want it to come into play as soon as possible to stop systematic online banking fraud, suggesting a date of July 2019. However, regulators UK Finance says the system would not be ready until “some time next year”.
What does online banking look like right now?
The Confirmation of Payee system should stem the rate of fraudulent online transactions that take place across the UK.
Regulators are keen to introduce the system and rectify the low-security measures currently in place when online payments are made.
Currently, anyone making a payment online adds the recipient’s name manually, but this is ignored by the bank. Only the account number and sort code need to match for the bank to approve the transaction and for the payment to be successful. This loose system has allowed fraudsters to pose as the recipients and trick victims into paying them money.
“The aim of Confirmation of Payee is to cut down on so-called authorised push payment (APP) scams, in which people are conned into sending money to another account.” BBC News
How will Confirmation of Payment work?
When setting up a new payment, or amending an existing one, banks will have the ability to check the name on the account of the person or organisation the customer is paying. Here’s the breakdown:
The 3 steps the new system will take to counter”fraud online
1. If you use the correct account name, you will receive confirmation that the details match, so you can proceed with the payment
2. If you use a similar name to the account holder, you will be provided with the actual name of the account holder to cross-reference it. You can then contact the intended recipient to check the details
3. If you enter 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
Why APP scams are serious: The Bank cannot recover the monies stolen
Banks are not obliged to give customers a full refund of money that’s lost through APP scams. This is why it’s so important that measures are introduced that stops these fraudulent activities taking place, as there isn’t?much banks can do to help customers once it has.
“One APP victim was Angelene Bungay, of Shrewsbury, who was duped into paying £13,000 to someone posing as the builder carrying out her loft conversion. She was not refunded by her bank. Banks typically refund only about a fifth of the money that goes missing, pointing to legislation that says customers may be liable if they authorise the payment and are negligent.” BBC News
So, SMEs and individuals, keep your eyes peeled for the Confirmation of Payment D-Day, whenever it comes…