Can Confirmation of Payee help to tackle APP fraud?  

18 July 2022

UK Finance, the banking and financial services trade association, recently published its latest data on Authorised Push Payment (APP) fraud, revealing that £583.2 million was lost to these scams last year, 39% up on the same period in 2020.  

APP fraud – where victims are tricked into sending funds from their bank account to a fake or fraudulent account – now exceeds losses caused by card fraud and, at a recent industry webinar, it was likened to the ‘digital COVID’ of fraud. 

There were 195,996 incidents of APP scams in 2021, including: 

  • £214.8 million lost to impersonation scams, where criminals impersonate trusted organisations such as a bank, or the NHS, to trick people into giving away their personal and financial information. This was the largest category of APP losses. 
  • £171.7 million lost to investment scams, where a business or consumer is persuaded to invest in a non-existent fund. This was the second largest category of APP losses, largely because the amounts involved can be much larger than other scams. 
  • 99,733 cases of purchase scams, the most common type of scam – accounting for 51 per cent of all cases – although total losses were £64.1 million. This is where a business or consumer is persuaded (online, by email, text or phone) to buy something that doesn’t exist or is never delivered. There was a surge of these frauds during the pandemic as more people were working from home, spending more time on the internet, and shopping online.   

As this type of fraud looks set to continue to rise (the Financial Ombudsman reported a 30% increase in complaints about APP scams in the second quarter of 2021), we ask whether open banking can play a role in helping to fight fraud? 

How can Confirmation of Payee help? 

While not a silver bullet in stopping APP fraud, the Confirmation of Payee (CoP) account name checking service was launched by Pay.UK in 2020 to help prevent fraud and accidentally misdirected payments.

When consumers and businesses make a payment, CoP lets them check if the money’s going to the right account. Before they transfer any funds, they can verify that the name on the recipient account is the same person or business they intend to send the money to, so funds end up in the right place. If the name on the account doesn’t match, CoP highlights the risks. 

Lloyds Banking Group said that the system helped reduce bank transfer scams by 31% within the first few months of its introduction in 2020. The CoP service has now processed more than one billion messages.  

Reducing misdirected payments 

The Payment Systems Regulator (PSR) also noted that, since the big six banks first introduced CoP in 2020, the service has had a positive impact on misdirected payments as well as scams.  

We work closely with Pay.UK to help deliver CoP, which is available in the UK through the OBIE Directory, and in Jersey, Guernsey and the Isle of our Man through our Crown Dependencies Directory.   

Kate Frankish, Chief Business Development Officer and Anti-fraud lead at Pay.UK, said: “We need to fight together, with better collaboration and knowledge sharing between banks, the government, regulators, telecoms and social media companies, and law enforcement. We need to increase public awareness of the risks of fraud. And we need to share data and technology that can spot the crime and enable banks and payment providers to intervene before it happens.” 

“Open banking plays an integral role in Pay.UK’s CoP account name checking service, and we are pleased to support the open banking ecosystem in the ongoing fight against fraud. This is vital as the PSR looks to extend the rollout of CoP, and make it possible for all banks, building societies and PSPs to offer the service." Ted Sidgwick, Head of Propositions, OBIE

Ted Sidgwick, Head of Propositions at the OBIE, added: “Open banking has an integral role in Pay.UK’s CoP service, and we are pleased to support the open banking ecosystem in the ongoing fight against fraud by sharing our experience of the service with account providers who are considering joining the ecosystem.

“This is particularly important as the PSR looks to extend the rollout of CoP, with the aim of encouraging further participation in the service by making it possible for all banks, building societies and PSPs to offer CoP. It will also help increase consumer confidence when setting up new bank payments.”