In the dynamic world of UK finance, lending businesses face an ever-present challenge: safeguarding their transactions against fraud while maintaining operational efficiency. Enter Confirmation of Payee (CoP), a revolutionary tool that’s reshaping the landscape of payment security for lenders across the United Kingdom.
What is Confirmation of Payee?
Confirmation of Payee is a verification system that checks if the name on a bank account matches the name of the intended recipient. It operates by verifying the recipient’s information against the data stored by their financial institution, providing payers with greater assurance that their payments are being routed to the intended recipient.
Launched in 2020, CoP was implemented to tackle the rising tide of Authorised Push Payment (APP) fraud. APP fraud takes place when a victim is tricked into sending money directly from their bank account to an account controlled by the attacker. Latest figures show that almost £460m was lost to APP fraud in 2023 in the UK alone.
How Does CoP Work?
When a lending business sets up a new payee or updates existing account details, CoP springs into action:
- The lender enters the borrower’s account details
- CoP checks these details against the recipient bank’s records
- The system returns one of four responses:
- Yes – The details match perfectly
- Close match – The name is similar, possibly due to a typo
- No match – The details don’t correspond
- Unavailable – The system couldn’t complete the check
This process creates a vital checkpoint, allowing lenders to verify recipient details before transferring funds.
Benefits for UK Lenders
Reduced fraud risk: CoP significantly decreases the likelihood of fraudulent loan applications and misdirected repayments.
Improved customer trust: By implementing CoP, lenders demonstrate their commitment to protecting customers’ funds, enhancing trust and reputation.
Operational efficiency: While adding an extra step, CoP actually streamlines processes by reducing the time and resources spent on fraud investigation and recovery.
Regulatory compliance: With CoP becoming mandatory, early adoption positions lenders favourably with regulators.
Impact on APP Fraud Rates
The implementation of CoP has had a significant impact on reducing APP fraud in the lending sector. According to UK Finance, while overall fraud losses increased to £1.3 billion in 2021, certain types of APP scams saw a reduction, highlighting the effectiveness of CoP.
In the lending industry specifically, the impact has been noteworthy. A report by the Payment Systems Regulator (PSR) in 2023 indicated that CoP has helped prevent an estimated £200 million in fraud since its introduction, with lending businesses reporting a substantial decrease in fraudulent loan applications and misdirected repayments.
Adoption Rates and the Future of Fraud Prevention in Lending
As of 2024, over 400 payment service providers (PSPs) have adopted CoP, with approximately 2 million checks completed daily. The UK’s Payment Systems Regulator has mandated that all PSPs handling Faster Payments and CHAPS must implement CoP by October 2024, signalling its growing importance in the financial ecosystem.
As we move further into 2024, CoP also continues to evolve, adapting to new challenges in the lending sector. Its success has inspired similar initiatives globally, with the European Union developing its own Validation of Payee (VoP) system.
For UK lending businesses, embracing CoP is no longer just an option—it’s a crucial step towards creating a more secure lending environment. By leveraging this powerful tool alongside other anti-fraud measures, lenders can significantly enhance their security posture, protect their customers, and contribute to a more robust financial ecosystem.
Interested in how APP fraud can affect your business? Get in touch with our team to learn more about fraud prevention, and how Confirmation of Payee is tackling these common issues.
