Banks to add further protection against scams and fraud with Confirmation of Payee

Banks are banding together to make it harder for fraudsters to scam Kiwis, particularly in a crucial part of the process – payments.

Together with the New Zealand Banking Association (NZBA), New Zealand's retail banks are working towards a new Confirmation of Payee (CoP) system, which is one way they aim to reduce the number of payments made to fraudulent bank accounts and help people avoid making payments to the wrong account.

The new CoP system will be an extra step in the online payment process, flagging whether the account name and account number entered are a match. To help protect Kiwis, the CoP alerts will provide customers with a match, close-match or no match notification.

The system aims to arm customers with extra knowledge, confirming whether the payment is going into the correct account and that the person is who they say they are, says ASB Digital Fraud Expert, Alex Hinde.

"Confirmation of Payee is essentially the ability for customers to check the account owner's name and account number match when they are about to make a payment through digital channels."

"It is about giving customers enough context and information in the moment they make a payment, so they can make an informed decision as to whether or not they feel comfortable making the payment."

Hinde said CoP isn't the silver bullet that will fix all scams and fraud, but is another tool in the toolkit.

"Scammers will continue to evolve and will likely provide excuses for why the payee's name does not match in their communication back and forth with the victim, but this extra step will help our customers to take a sec to check that the person is legitimate."

Hinde said CoP will be an extra step for customers, who have for years used internet and phone banking with ease. The extra step will happen prior to any money leaving the account and should only take a few seconds.

"In adding this extra protection it's important we also protect the customer experience and the ability for customers to do what they want to do in the payments space easily and efficiently."

"The major benefit CoP brings is that it gives customers confidence their money is going to the correct person or business."

While the system gives customers an extra layer of protection, they will now have to be slightly more thoughtful when making one-off payments.

CoP will ask all customers for an accurate account name. Payments to nicknames, for example 'mum' will now need to have the actual name entered and a CoP check will be performed, no matter how small the payment.

"This is a significant change to some really embedded behaviour for Kiwis and the industry will work together to help customers understand and adjust to this change.

Hinde says that NZBA has been closely following how other jurisdictions have handled this challenge, using these learnings to inform how they design, build and rollout CoP in New Zealand.

The move is driven through NZBA, as well as CEOs of its retail member banks.

NZBA says creating a CoP system to suit local conditions is a priority, and it has just completed a competitive selection process to appoint those who will build the service. CoP is on track to start rolling out by the end of the year.

Hinde says CoP will disrupt some of the scams which come under 'authorised fraud, where the customer is knowingly making a payment, but unknowingly to fraudulent accounts. But there will be limitations.

"CoP won't completely stop romance or investment scams. As we know, scammers can be very cunning at manipulating, or social engineering customers, with elaborate explanations to help get around bank processes and security measures, as well as convincing you into giving up your confidential information."

It also won't help in cases of online shopping scams, where credit card details are entered into a website. That's because when we shop online, account names and numbers are not used and therefore won't be CoP checked, he says.

As a New Zealand solution, CoP will only apply to transactions made domestically, and not when making international money transfers.

Hinde says the aim is for customers to gain knowledge and use it to make more informed decisions before the money has been transferred into the accounts of possible scammers.

"We hope it will cause customers to take a step back and ask 'why are they asking for these payments?' 'How did I get in contact with these people?' 'Was it through a trusted source?' And it triggers the rest of the questioning we want to see people take on."

"It's critical we have a range of controls and security measures in place which combine to create a safer environment and greater confidence for Kiwi consumers."

For urgent help and current scams, visit: asb.co.nz/asbscamhub