Confirmation of Payee: Transforming the Payment’s Landscape
With the increasing number of online transactions, the risk of fraud and unauthorized access to financial information has grown significantly. Ensuring that payments are secured is crucial for maintaining trust between businesses and their customers. Payment regulation protect sensitive account details, prevent financial losses, and uphold the integrity of systems. One such measure that has gained prominence is the Confirmation of Payee (CoP), a system designed to enhance the security of transactions.
What is Confirmation of Payee?
Confirmation of Payee (CoP) is a measure implemented by the PSR to check that the name of the payee matches the account details provided during a transaction. This service helps to prevent misdirected payments and reduce fraud by verifying that the recipient’s name matches the account information on record.
In August 2019, the PSR directed the UK’s six largest banking groups to implement CoP by the end of March 2020. This directive was aimed at addressing Authorized Push Payment (APP) scams, where fraudsters trick individuals into sending money to the wrong account: every one of the bank should be able to protect their customers. The initial implementation covered around 90% of Faster Payments and CHAPS transaction.
Note: The Payment Systems Regulator (PSR) is the economic regulator for the payment systems industry in the UK.
The Importance of CoP for Payment Service Providers (PSPs)
Implementing CoP offers several key benefits:
By adopting CoP, PSPs such as banks can significantly enhance their security measures, build customer trust, and comply with regulatory requirements, ultimately leading to a more secure and reliable payment system.
What Does CoP Mean for Corporates?
For a business, the implementation of Confirmation of Payee (CoP) brings a multitude of benefits:
What is the Future of CoP?
To further enhance payment security, the Payment Systems Regulator (PSR) issued a new direction in February 2022, the second phase. This new phase mandates the adoption of Confirmation of Payee (CoP) by an additional 400 financial firms by mid-2024. This expansion aims to check that nearly all transactions made via Faster Payments and CHAPS are covered by CoP, significantly reducing the risk of fraud and misdirected payments.
The new phase is part of the PSR’s ongoing efforts to combat payment fraud and enhance the security of payment systems in the UK.
The European Verification of Payee (VoP)
Inspired by the success of CoP in the UK, the European Payments Council developed the Verification of Payee (VoP) scheme to enhance payment security across the Single Euro Payments Area (SEPA). The new VoP scheme provides a set of inter-payment service provider (PSP) rules, practices, and standards to be complied with by participants. It aims to prevent fraud by verifying the payee’s details in real-time during SEPA Credit Transfer (SCT) or SEPA Instant Credit Transfer (SCT Inst) transactions.
The VoP scheme allows the PSP of the payer (the Requesting PSP) to instantly send a request to the PSP of the payee (the Responding PSP) to verify the IBAN and the name of the payee. The Responding PSP then verifies whether the received data match the data registered for that payee and provides a response (e.g., match, no match, close match). This process helps to check that payments are directed to the correct account, thereby reducing the risk of fraud and misdirected payments.
The VoP scheme is part of the broader effort to comply with the future EU Instant Payments Regulation (IPR), which aims to enhance payment reliability and prevent fraud across the Eurozone.
