Factoring in the safety switch with Confirmation of Payee

Real-time payments in the U.K. continue to increase in volume, with a projected CAGR of 6.6% over the next five years according to ACI’s 2024 Prime Time for Real-Time report. Real-time transactions are settled within milliseconds and are irrevocable. The need for security is greater now than ever to ensure that funds arrive at the right destination.

Banks can optimize operational costs and revenue by minimizing the need to reverse erroneous transactions or conduct costly fraud investigations and recovery efforts. CoP adds another tool to future-proof their payments ecosystem.

CoP removes the element of human error. By pre-matching the destination account number and account holder’s information, CoP guides the transactional value to its correct destination, while avoiding scamming masterminds. CoP is now an established mandate for banks and financial institutions to help move funds securely. PAY.UK reports that since the launch of CoP in 2020, there have been more than 1.9 million checks each day.

CoP administration primarily sits with the sender when they add a new beneficiary to their list of approved payees. Within the U.K., this added layer of accuracy confirmation has seen a clear benefit that protects consumers from being scammed.

Imagine a fraudster pretending to be your electricity provider and requesting the funds be directed to a different bank account on a pretense, with reasons that appear legitimate. CoP-enabled financial institutions validate the account information around the transaction to ensure its genuine nature. If the financial institution’s account opening processes are sound, the fraudster will not have been able to open an account in the name of your electricity provider. The CoP check will fail.

Financial institutions without CoP checks run the risk that fraudulent payments will go through — even if the payer includes the name of their electricity provider in their payment instructions — because there is a lack of automatic account number/account name checking, and transaction processes only require an accurate destination account number to succeed.

Though CoP is a recent innovation in the market, the potential to harness the power of accuracy in the hands of the consumer instills confidence within the financial institution’s customer base to conduct transactions confidently.

After understanding the importance of CoP in the U.K., different countries are seeking the opportunity to work their way into integrating the layer of authentication.

U.K.

In 2008, real-time payments were introduced into the U.K. payments ecosystem. But as the world entered the COVID-19 pandemic, everything went digital, and scams skyrocketed. U.K.-native real-time payments adoption has been secured by mandatory regulation since CoP’s introduction in 2020.

India

India has emerged as a real-time revolution leader, where real-time payments have become the nervous system of their banking infrastructure. Banks have actively started to combine technology with human efforts to reduce complexities and operational costs if a transaction has been flagged as fraudulent.
Recently, the Reserve Bank of India has taken notice of real-time confirmation of the beneficiary’s name instead of relying on the Indian financial system’s code to identify the receiving account.

EU

The Netherlands leads the CoP market by verifying 99.5% of payments made. Meanwhile, within Europe, the need to implement an EU-wide CoP system that includes domestic and cross-border international transactions is under discussion.

Worldwide

The global payments ecosystem relies on shared intelligence and collaboration. As countries explore CoP’s abilities and advantages, it creates an opportunity to add an extra layer of security around validation with less friction.

Driven by financial institutions, navigated by regulators

The world is experiencing a shift in technology and advanced tools. At the same time, these tools and technologies have opened the doors for fraudsters to fuel their malpractices and blur the fine line between “real” and “fake.” Financial institutions are aware of these challenges as they join forces with government bodies and other regional players to enforce security measures that don’t disrupt the progress and convenience that consumers love.

Each new addition also adds to operational costs and heavy lifting
Understanding what moves markets to redefine security measures and identifying an experienced partner who can support you without disrupting processes is essential. Complex mandates and compliance regulations require extensive expertise, but with the right combination, it can be seamless.

ACI Worldwide powers the world’s payments ecosystem with payments intelligence, real-time fraud management solutions, and precision decisioning. Our experts are ready to meet this challenge now and can quickly pivot to meet the emerging trends facing your industry. Remain compliant, stay competitive, and achieve your strategic goals with one easy-to-integrate platform.