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Confirmation of Payee (CoP)

In today’s interconnected financial landscape, protecting business and payment transactions from fraud and errors is crucial. One of the key tools for achieving this security is Confirmation of Payee (CoP).

What is Confirmation of Payee?

Confirmation of Payee (CoP) is a service whose purpose is to verify and check that the recipient’s name matches the bank account details (account number…) provided by the payer before a payment is completed (for both a person or a business). This service verification process does a critical check to ensure that funds are directed to the correct bank account holder, new or known, thereby minimizing the risk of misdirected payments and scams.
This not only protects a business from financial losses but also builds greater trust in the payment system. The implementation of Confirmation of Payee (CoP) significantly reduces the chances of fraud, such as payment redirection scams, and enhances the overall integrity and reliability of financial transactions.

How does Confirmation of Payee work?

When a payer wants to make a payment on an account, they must enter the recipient’s bank account details, including the account number and the name of the bank account holder. Confirmation of Payee is then triggered to check these details before the payment is processed. This verification step occurs immediately after the payment details are submitted and before the transaction is completed.
The goal is to ensure that the name and the number on the account match the ones provided by the payer, confirming that the funds are being sent to the correct details person.
If the names match, the payment proceeds as intended. The payer receives a confirmation that the recipient’s account details have been verified, and the transaction is completed. This seamless process ensures that payments are sent to the correct bank account.
In the case of a mismatch in the account details, the process is interrupted. The payer is alerted of the discrepancy and is provided with options on how to proceed.

Typically, the payer can choose to:

The payer can double-check the account details they entered to ensure there were no typographical errors or mistakes. If an error is found, they can correct it and pay.

If the payer is unsure why there is a mismatch or suspects potential fraud, they can cancel payments to prevent any risk of funds being sent to the wrong account.

In some cases, if the payer believes the details are correct despite the mismatch, they may choose to pay, although this is generally discouraged unless they have additional means of verifying the recipient.

Is Confirmation of Payee effective against fraud?

The service Confirmation of Payee is effective in mitigating certain types of fraud risks, being mostly used for avoiding any risks in business, but can also have limitations.

Avantages:

Confirmation of Payee prevents fraudsters from tricking payers into transferring funds to a fraudulent bank account by posing as a legitimate payee. This is particularly beneficial for businesses making large or frequent transactions.

Confirmation of Payee mitigates the risk of human errors, such as mistyped account numbers or incorrect recipient names. By verifying the details before the transaction is completed, Confirmation of Payee (CoP) ensures that mistakes are caught and corrected in time.

The implementation of Confirmation of Payee enhances overall trust in the payment system, as users feel more secure to pay knowing that additional checks are in place to prevent errors and fraud.

Limitations:

CoP is not designed to combat phishing. If the service can check details before a payment, CoP cannot prevent fraud by email or phone, when the payer willingly enters incorrect data (email…) under false pretenses.

CoP does not address fraud involving account takeovers, where an unauthorized person gains access to an account and initiates transactions from within. Since the account details would still match, CoP would not detect any discrepancy.

The effectiveness of CoP is limited to banks and payment service providers that have implemented the system. Transactions involving non-participating institutions may not benefit from CoP verification.

The Instant Payment Regulation in Europe

Today, many European countries have their own Confirmation of Payee (CoP) verification systems. With the emergence of new European regulations the landscape of banking transactions in Europe will change drastically, calling into question the future of current CoP schemes. The new Instant Payment Regulation is one.
In 2025, payment service providers (bank…) will have to be able to generalize instant transfers across the European Union without additional fees for users (both person and business). A service to verify the match between the beneficiary’s name and the provided bank details will also have to be offered. The Instant Payment Regulation in Europe aims to modernize and streamline payment systems by enabling real-time transactions across the continent. In Europe, the service known as Confirmation of Payee will be Verification of Payee (VoP).

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