Our Confirmation of Payee service is an industry-wide initiative that looks to safeguard against misdirected payments and combat fraud. Introduced in 2020, and adopted initially by just six UK banking groups, the service has since grown in repute and is now used by over 320 organisations, covering more than 99% of organisations initiating Faster Payments in the UK.
Here, we map the journey of Confirmation of Payee in the UK over the last five years, from inception to expansion, and how it has transformed the payments landscape.
How does Confirmation of Payee work?
Confirmation of Payee is an account name-checking service designed to help reduce misdirected payments and provide greater assurance that payments are being sent, and collected from, the intended account holder when making a first-time UK payment. An API-based peer-to-peer service, it has no central infrastructure and uses a directory to identify organisations in the ecosystem to complete the check.
Inception
In 2015, the Payment Systems Regulator (PSR) established the Payment Strategy Forum (PSF) to develop strategic initiatives where the industry would work together to deliver innovation. As part of this work, the PSF identified detriments experienced by end users of the retail interbank payment systems in the UK; the feedback showed that consumers and organisations desired greater control over automated payments, greater assurance that payments would reach the intended recipient, and enhanced data that would allow them to understand what a payment they made of receive related to.
Confirmation of Payee was one overlay service that was created to address these detriments. This PSF’s Design & Implementation Blueprint was published in December 2017 and taken on by Pay.UK to review and deliver.
Adoption
Accounting for a significant portion of the Faster Payment transactions in the UK, the six biggest banking groups – Barclays, NatWest Group, Santander, HSBC, Nationwide Building Society and Lloyds Banking Group – were all mandated to adopt Confirmation of Payee by June 2020.
The effectiveness of the overlay to reduce misdirected payments was quickly recognised, as too was its intrinsic ability to reduce instances of authorised push payment fraud. Indeed, latest statistics show a 53% reduction in Credit Payment Recovery sent claims percentage – a process where a payment made in error or incorrectly is recovered from the recipient’s bank.
As such, many banks followed suit in voluntarily signing up for Confirmation of Payee and in October 2022, the PSR issued Specific Direction 17 mandating around 400 payment service providers to implement the service by 31 October 2024.
Expansion
Following release of the mandate, we worked extensively with the industry to support payment service providers in fulfilling their legal obligation to implement Confirmation of Payee by the deadline. To this end, we developed a new aggregator model to enable providers, particularly those with limited technical capability, to access the service via one of eight Pay.UK-accredited technology partners.
This new model allows providers to join indirectly and enables simpler onboarding as it offers ‘one-to-many’ interaction points to allow for distributed service. The new Pay.UK Directory, meanwhile, further complements our other fraud detection and prevention initiatives to support our objective to mitigate and reduce instance of APP fraud.
We continue to look to develop the service, exploring potential future use cases and interoperability with similar international solutions for the benefit of end users.
Product Owner, Anu Raman, says: “We have achieved a great deal in five years – taking Confirmation of Payee from ideation through to UK-wide adoption. Today, the service is considered both a customary and integral part of the payment journey, with its benefits readily recognised for both payment service providers and end users. I look forward to developing the service here in the UK to ensure it continues to most effectively address end-user needs, in keeping with its initial purpose. I also look forward to working with other countries, sharing the knowledge and lessons from our Confirmation of Payee journey in the UK, so they too can develop effective solutions for end users.”
