What is Confirmation of Payee?

Authorized-push-payment fraud is on the rise. In the UK alone, £239.3 million was lost to APP scams in the first half of 2023.

The payments industry is fighting back with Confirmation of Payee—an account verification service that lets a payer confirm that the person or business they are transacting with, is who they claim to be. 

So, how does Confirmation of Payee work? 

Let’s say you’re buying concert tickets from an online marketplace. You agree on a price with the seller and proceed with the purchase.

Once you start the payment, your bank will send a request to the seller’s bank to check the account information you have been given matches what they have in their system. You’ll receive a notification based on the outcome. 

If there’s a difference in, say, the name, you can then either amend the details and resend, continue with the transaction, or cancel the payment altogether. 

Confirmation of Payee has proven so powerful that services are springing up all over Europe.  

In the UK alone, over 100 organizations have already implemented CoP since its launch in 2020, and it’s beginning to have an impact. Another 400 organizations are expected to join by October 2024. 

But most striking is what happened in the Netherlands. Dutch banks reported an 81% reduction in fraud cases – invoice fraud, specifically – after introducing a confirmation of payee service. A fantastic achievement!

However, one that comes with side effects. 

Shortly after Confirmation of Payee was introduced in the Netherlands, fraudsters began exploiting banks that did not use the service in other countries. Cross-border invoice fraud shot up. 

To be truly effective, Confirmation of Payee needs to be widely implemented to prevent fraudsters from migrating to banks that do not use it. 

The EU will soon legally require small and midsize European banks to introduce Verification of Payee as part of the new SEPA Instant Regulations. 

It’s an exciting development. But it will be incredibly challenging to implement from a technical perspective, with such tight deadlines. 

Confirmation of Payee is proving to be a powerful weapon in the fight against fraud. Banks that are looking to introduce instant payments elsewhere in the world, should take note.