European Commission presses forward with Confirmation of Payee adoption for Euro instant payments
European legislators have for years been seeking to make financial transactions faster and more secure. One way they’re achieving this is through the Single Euro Payments Area (SEPA), a scheme that makes it possible for customers of financial services providers—namely banks—to make cashless payments anywhere in the European Union and to a number of non-EU countries quickly, safely, and efficiently.
On October 26, it was announced that the Commission plans to accelerate ongoing efforts to make instant payments more widely available. One of the key ways to achieve this, as we will explore in more detail here, is through increasing trust in instant payments via mandates for the adoption of processes like Confirmation of Payee.
Accelerating the rollout of instant payments
The proposal, which amends the 2012 Regulation on the Single European Payments Area, introduces four requirements regarding Euro instant payments.
- Making instant Euro payments universally available, with an obligation on EU payment service providers that already offer credit transfers in euro to also offer their instant version within a defined period.
- Making instant Euro payments affordable, with an obligation on payment service providers to ensure that the price for instant payments in Euro does not exceed the fee charged for traditional credit transfers.
- Increasing trust in instant payments, with an obligation on providers to verify the match between the bank account number (IBAN) and the name of the beneficiary provided by the payer in order to alert the payer of a possible mistake or fraud before the payment is made.
- Removing friction in the processing of instant euro payments while preserving the effectiveness of screening of persons that are subject to EU sanctions
“Today’s proposal fulfills a key commitment in the Commission's 2020 Retail Payments Strategy, which aims for the full uptake of instant payments in the EU,” reads a press release on the European Commission website.
It is requirement number three which has the potential to be particularly disruptive for banks and service providers because it introduces an entirely new process, Confirmation of Payee.
What is Confirmation of Payee?
Confirmation of Payee (CoP) is the banking industry’s response to Authorised Push Payment (APP) fraud— where victims are tricked into making instant payments to fraudsters, typically through social engineering and impersonation—and misdirected payments.
CoP works by limiting the number of methods that fraudsters can use to trick banking customers into sending authorised payments to criminal accounts. It works by confirming that the payee’s name matches the bank account number (IBAN) when funds are being sent and communicating this information to the payer.
CoP has been shown to:
- Reduce impersonation and APP fraud.
- Lead to fewer accidental or misdirected payments.
- Increase customer confidence and satisfaction.
- Assist in fraud investigation
- Have no negative impact on customer experience. Protect your customers against fraud and misdirected payments
Although CoP has been optional for banks since its introduction a few years ago, regulators in some jurisdictions are now mandating its implementation.
In the UK, for example, the Payment Services Regulator (PSR) has given the date of 31 October 2024, as the deadline for when smaller financial firms, Building Societies, and payment service providers must have adopted a CoP solution.
Meanwhile, several regulators and payments associations are currently exploring how CoP could be implemented to improve the security and trust of their payment systems, and it’s likely that we’ll see further mandates for it and similar solutions being introduced in other jurisdictions in the near future.
What this means for European banks
The proposal’s four requirements outlined above only apply to institutions offering instant payments in the Euro currency. This includes all banks and any payment services provider that offers instant payments, including those that are not under an obligation to do so.
Although this is an extremely ambitious undertaking and the finer details are still pending, banks and PSPs that offer instant payments shouldn’t wait to begin reviewing their CoP capabilities. It’s better to get ahead and start working on your implementation now, or at least know about the impact it could have on your operations, so that you’re prepared for any eventuality.
With all the advantages we mentioned above, it pays to get started now and the deadline for compliance slowly closing in, it pays to get ahead now.
The solution: SurePay CoP
Founded in 2016, SurePay CoP was the first commercial IBAN-Name Check solution to be successfully rolled out in The Netherlands and the UK, where our technology has pioneered the ongoing CoP rollout.
Our technical solution acts as a name-checking service and provides real-time feedback on beneficiary details. Powered by our proprietary matching algorithm, SurePay CoP combines cutting-edge data science techniques with profound knowledge of transactional behavior to help prevent fraud and misdirected payments.
With SurePay CoP, more than 170 million accounts can be checked in frontrunner countries already via our single API, and this number is growing each week as new banks join the network. To date, more than 5 Billion name checks have been carried out, leading to results of an up to 81% mitigation of payment fraud and a 67% drop in misdirected payments.
With our proven and documented experience of checking payments in the Netherlands, UK, France, Italy, and Swift, SurePay is looking forward to helping and supporting European nations and national banks by providing name checks across various jurisdictions through the implementation of our Confirmation of Payee solution.
We’ve got lots of different models and solutions available to fit the needs of any bank while remaining compliant with national and international rules and regulations. Get started now to help protect your customers, reduce operational costs, and ensure future compliance with potential CoP mandates.
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