The PSR expands Confirmation of Payee requirements that aim to reduce fraud and misdirected payments
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Introduction
On 11 October 2022, the Payment Systems Regulator (PSR) published a Direction expanding Confirmation of Payee (CoP) service to around 400 payment services providers (PSPs) who operate accounts for customers.
What is CoP?
CoP is a service that aims to prevent certain types of scams (authorised push payment fraud – APP scams) and accidentally misdirected payments by customers looking to make payments to recipients. The service works by checking the name of the payee’s account against the name and account details given by the payer. CoP helps individuals and organisations make payments to the intended recipient safely.
In setting up a new payment for a customer, a PSP is able to check the name, sort code, account number, plus, if applicable, secondary reference data such as building society roll number, and type of account of the person or organisation of the intended recipient, against the details held on the account.
CoP is run by the Payment Systems Operator Pay.UK, and is being implemented by the UK’s banks, building societies and PSPs.
Who is in scope and what are the key dates?
The PSR’s Direction has identified two groups of firms who will need to implement the system:
- Group 1: PSPs named in Annex 1 to the PSPs Direction (see on p. 45) must have a CoP system in place after 31 October 2023.
- Group 2: All other PSPs that use unique sort codes, or are building societie4s using an SRD reference type, must be able to offer the CoP service after 31 October 2024.
The PSR has stated that Group 1 has been prioritised due to the “complexity and size” of the respective institutions, also by taking into account the impact on the prevention of APP scams. By prioritising this group, the PSR expects to increase CoP coverage from 92% of Faster Payments Transactions to 99% after October 2023.
Are there any PSPs exempted?
The PSR may decide to exempt a directed PSP or change the date for its compliance, to take relevant circumstances into account.
Can a directed PSP rely on another person to provide the system on its behalf?
A directed PSP may enter into arrangements with a third party for the system to be provided on its behalf, but the PSP will ultimately remain liable for compliance with the requirements of the Direction.
Will this introduce any changes to the Faster Payments Scheme?
At this stage, the PSR has not directed Pay.UK to make any rule changes to the Faster Payments Scheme. Notwithstanding this initial position, the PSR has stated that it may revisit this as part of any other rule changes that it may introduce in the future.
Our Payment Services Regulatory team will be monitoring next steps and shall keep you up-to-speed with the latest developments.
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