The financial landscape in the UK has been undergoing a significant transformation, with a heightened focus on security and accuracy in money transfers. At the forefront of this movement is Confirmation of Payee (CoP), an innovative account name-checking service designed to combat fraud and prevent accidental mispayments.
Before CoP, traditional online payments lacked a verification step for payee names, which created vulnerabilities fraudsters exploited through tactics like Authorised Push Payment (APP) scams. By impersonating legitimate recipients, they tricked unsuspecting individuals and businesses into transferring money into fraudulent accounts. CoP helps to address this concern by introducing a mandatory check on the payee’s name when setting up a new payment beneficiary. In this article, we dive into the intricacies of CoP, functionalities, impact on the financial sector, and benefits to individuals and businesses.
What is Confirmation of Payee (CoP)
Confirmation of Payee (CoP, or Verification of Payee, VoP, as it is known in Europe) is an account name-checking service designed to reduce fraud and accidental mispayments. CoP acts as a safety net for payers; it verifies that the name on the recipient’s account matches the intended payee before the first payment is sent.
CoP: Designed to Secure Transactions
With the increasing adoption of digital payments, there was a surge in digital fraud. This surge in transaction fraud was increasing consistently, and preventive measures were necessary.
To help combat this growing threat of Authorised Push Payment (APP) fraud, the Payment Systems Regulator issued Specific Direction 10 to the UK’s 6 largest banks. In 2019, in response to SD10, Pay.UK launched the UK’s Confirmation of Payee (CoP) service.
In APP scams, fraudsters trick victims into sending money to fraudulent accounts. For example, entire life savings were lost when fraudsters, posing as conveyancers, had homebuyers send deposits into the criminal’s bank accounts. CoP acts as a security layer by ensuring the payee’s name aligns with the intended recipient.
Today, many of the UK’s banks and other payment service providers (PSPs) have successfully implemented CoP, averaging more than one million Confirmation of Payee checks every day.
How Confirmation of Payee Works
In simple terms, CoP utilises an API-based system that verifies account names in real-time. The process can be broken down into:
- Creating a new Payment Recipient: Before a payment, the payer must enter the recipient’s (payee’s) account details, including their name. This is often done via online or mobile banking but may also be done via telephone banking or in branches.
- CoP Verification: Your bank then initiates a CoP check, securely transmitting the payee’s name and account details.
- Verifying and Matching the name: The payee’s bank then checks its systems to see if the name matches.
- Feedback and Confirmation: After performing the match, the payee’s bank responds with the results to your bank. You’ll see a confirmation message indicating if the names match, likely match, or don’t match.
- Proceed or Investigate: Based on the result, you can choose to proceed to complete the payment or investigate further if there’s a discrepancy.
Why has Confirmation of Payee been introduced?
CoP was introduced to combat the rising incidence of APP fraud and accidental misdirected payments. It empowers individuals and businesses to send money with greater confidence, minimising the risk of falling victim to scams or making unintended transfers. CoP has a multi-faceted impact on the financial landscape, including but not limited to:
- Reduced Fraud: CoP is a significant deterrent against APP fraud, protecting individuals and businesses from financial losses.
- Reduced accidental misdirected payments: CoP helps to protect against payers accidentally sending payments into the wrong account.
- Increased Confidence: By verifying payee names, CoP fosters trust and encourages secure online transactions.
- Improved Efficiency: CoP streamlines the payment process by minimising the need for fraud investigations and payment reversals.
CoP banking refers to the integration of Confirmation of Payee services within online and mobile banking platforms. All major UK banks and many major EU banks have already implemented CoP, making it a standard feature for secure money transfers.
Is Confirmation of Payee mandatory?
Confirmation of Payee (CoP) significantly reduces the risk of payments landing in the wrong account. This added security protects against accidental typos and malicious attempts to divert funds.
Phased Rollout in the UK:
Launched in 2020, CoP was initially mandated by the Payment Systems Regulator (PSR) for online and mobile payments within the UK’s six largest banking groups, and this was later extended to CHAPS payments. The PSR’s reach has since expanded, with CoP adoption required for 50 additional firms in June 2024.
By October 2024, all Payment Service Providers (PSPs) offering Faster Payments, CHAPS, or setting up new Standing Orders are expected to be compliant with CoP.
Benefit with XBP Europe’s CoP services
Since 2020, over 100 organisations have implemented CoP within the UK, with more than 1.9 million checks completed every day.
The Payment System Regulator has mandated that 400 organisations join CoP in 2024 to control transaction discrepancies and reduce fraud. You can find out more about PSR SD17 here.
Proven by its high and valued effectiveness, CoP has quickly become a utility service that customers expect when making a payment – making CoP a mandatory service.
XBP Europe offers a fully managed cloud-based CoP solution. We host a completely self-contained CoP Endpoint (CoP Responder), including an authorisation server, advanced name-matching engine, and secure account name database. Our AI-powered name-matching engine has been recognised by the Payments Association and was shortlisted in the Pay360 Awards 2023. While some other CoP service providers concentrate on matching rates (how often can they say ‘yes’), XBP Europe concentrates on matching accuracy – minimising both false positives and false negatives.
Additionally, XBP Europe’s CoP service can be integrated into the Bank’s core systems via API and web portal to obtain account name information (CoP Requestor), providing access to all existing and future CoP participant endpoints.
XBP Europe’s Dynamic Client Registration service automatically discovers and registers new participants with Pay.UK’s Confirmation of Payee ecosystem provides daily activity reports and manages directory configurations.
XBP Europe hosts mission-critical services for UK banks
Our technology and services are used throughout the UK’s core and emerging payment programmes, including Confirmation of Payee, Faster Payments Service (FPS), misdirected payment investigations, ICS (Request to Pay), and more. Here’s why you should opt for XBP Europe’s Confirmation of Payee services:
Rapid deployment – Our cloud-based platform boasts rapid deployment, eliminating the need for lengthy setup processes. In addition to API integration, XBP Europe provides access to a webUI portal to initiate CoP checks. The portal allows for rapid deployment of an in-branch outbound CoP solution by removing the integration with Core banking systems.
Bank staff can initiate CoP checks within weeks of engaging with XBP Europe while the full integration project continues. This allows the bank to realise the benefits of CoP extremely early in the project.
Matching rate and accuracy – XBP Europe’s industry-leading name-matching engine is built upon the foundation of over three decades of refining and finetuning. Trusted by over 400 financial institutions across Germany, Austria, Hungary, and Italy, our engine has performed billions of name verification checks, ensuring accuracy and compliance.
- AI-powered Matching: At its core lies an advanced artificial intelligence that utilises Levenshtein distance analysis with sound-aware approximations; this allows for highly accurate matching, even with minor variations in spelling or typos.
- Data Enrichment & Normalisation: Your bank records and incoming CoP requests are sanitised and standardised for optimal matching. Additionally, we leverage external data sources to provide the most comprehensive and accurate results.
- Reduced False Negatives & False Positives: Our name-matching engine aims to avoid false negative and false positives mistakes for accurate and secure transactions.
XBP Europe’s name-matching engine aims to minimise both false positives and false negatives. It aims for greater accuracy by using a combination of AI and advanced matching algorithms to tackle problems relating to issues for name matching, such as missing components, spelling differences, truncated names, and so on. Learn how implementing confirmation of payee (CoP) helped a UK bank protect its customers against APP and misdirected payment frauds.
Our CoP solution offers that peace of mind. Powered by industry-leading AI tools, it handles complex names while the payers and payees benefit from frictionless and accurate payments. Our solution is efficient and cost-effective, with a turnaround time of ~100ms for name-matching, enabling a faster, safer payment experience.
Get in touch to learn more about XBP Europe’s Confirmation of Payee.