Banks select provider for confirmation-of-payee, a key anti-scam measure; Consumer says efforts ‘too slow, too light’

Confirmation of payee will match names to account numbers, making it harder to dupe people into transferring money to a scammer.

New Zealand’s major banks say they have selected a provider to implement “confirmation-of-payee” - which some experts see as a key step towards stopping scams.

But Consumer NZ says the sector’s approach is “too slow and too light”.

Consumer also wants to see accelerated efforts to create an anti-scam centre, seen by all-comers as the next major step in fighting online fraudsters.

But the NZ Bankers Association - representing the major retail banks - and Commerce and Consumer Affairs Minister Andrew Bayly have differing takes on who should drive the effort.

“We’ve just completed a competitive selection process and now have a preferred provider for the service. We won’t be able to announce the name of that provider until we’ve finalised the contractual arrangements,” NZBA chief executive Roger Beaumont says.

“In line with our previously announced commitment, we’re on track to start rolling this out by the end of the year.”

"Take a sec to check": As an interim measure before across-the-board confirmation-of-payee is introduced, ASB and other major banks have introduced warnings that names are not currently matched to account numbers.

In the meantime, banks including ASB, ANZ, Kiwibank, and Westpac have introduced warning notices on transactions as an interim step. BNZ says a similar alert is in the works.

For example, ANZ’s app now warns: “This payment will be made immediately. Account name isn’t matched, verified or checked against account number.”

Silver bullet?

‘Confirmation-of-payee’ will help people making an online payment from one bank account to another to check whether they’re paying the right account and may help identify payments to scammers, the association says. It will also help people avoid making mistaken payments to the wrong account.

When a customer makes a payment they currently need to enter the recipient’s name and account number. Once it’s available, confirmation-of-payee will compare the name a customer has put into their payment details against the actual name registered against the account number and indicate whether that name matches or not, NZBA says.

Earlier this year, Worldline (formerly known as Paymark) told the Herald it is working with a firm called Surepay to launch a confirmation-of-payee service in New Zealand. Surepay’s system has been provided to banks in Europe since 2017 and is today used widely in the United Kingdom.

Since 2017, Surepay has performed over 6.5 billion checks resulting in an 81 per cent reduction in fraudulent payments to local bank accounts and a 67 per cent drop in misdirected payments, Worldline said. (Today, the firm said it could not comment while contracts were still in process.)

And Consumer NZ has framed confirmation-of-payee as “a simple step that will stamp out scams”.

Red flags can be raised when names and account numbers simply don’t match, while people’s guard will be raised if they think they have been dealing with a company, but an account name indicates it’s actually an individual.

But Beaumont says: “Confirmation-of-payee won’t be a silver bullet in the war on scams. This solution is part of a suite of anti-scam initiatives being implemented by retail banks. Scams are increasingly sophisticated and require a layered approach to prevent them and protect consumers.”

Other steps included ongoing efforts to raise consumer awareness and the first phase of an anti-scam centre.

More urgency needed: Consumer

“We congratulate the NZBA for keeping the public up to date on progress on the rollout out confirmation-of-payee, but remain concerned that the sector’s approach to protecting its customers from scams and fraud is too slow and too light touch,” Consumer NZ campaign manager Jess Walker told the Herald.

“Bank customers are losing at least $200 million a year in scams and fraud according to the Banking Ombudsman and the issue requires more urgency than we have seen so far from the sector.”

NZBA responds

The NZBA first announced it would pursue confirmation-of-payee measures in September last year. Asked why it would take until the potentially the end of this year to begin a rollout, Beaumont replied:

“Rolling out confirmation-of-payee is not as simple as flicking a switch. Broadly speaking there are two main phases involved. First, we need to build a solution and ensure it works technically with our current payments system and complies with banks’ privacy and confidentiality obligations.

“Once we have that, banks then individually need to implement changes to their own systems to make the solution available to their customers, and that includes designing, building, and rolling out updates to their apps and online banking platforms.“

Banks might also need to make frontline changes for handling customer payments in branch or through a contact centre, Beaumont said.

Who should lead the anti-scam centre push?

All of the organisations involved - from banks to government to telcos to social media firms to law enforcement to agencies like Netsafe - agree that an anti-scam centre should be created to co-ordinate efforts against cyber-fraud.

But there are differing takes on who should lead the effort.

“Phase one” of anti-scam centre efforts had seen banks co-operate to identify more than 1500 “mule” accounts, Beaumont said.

"Government must play a role [but] I reject the idea that there is nothing further banks can do, and everything must be led by Government" - Commerce and Consumer Affairs Minister Andrew Bayly. Photo / Mark Mitchell

What would future phases involve? That would depend in part on the Government.

“To take the centre to the next level, we’ve asked the Government for operational support by involving the police and other relevant agencies. We’ve also asked them to set scam prevention expectations for other industries,” Beaumont said.

Earlier this month, Bayly said that while the Government had a role to play: “Banks have a duty of care to their clients ... I expect them to lead this work.”

Bayly said he had recently visited Australia’s National Anti-Scam Centre, created with A$86.5m ($91.4m) in Budget 2023 funding. It sits within the ACCC (the Aussie equivalent of NZ’s Commerce Commission) and co-ordinates public and private efforts to fight fraudsters. The concept had clear value and warranted further investigation.

“However, there are some preliminary steps which banks must take the lead on before government gets involved,” Bayly said.

‘Rudimentary efforts’

Consumer’s view is that banks’ efforts haven’t been up to scratch and that the Government should take the lead on an anti-scam centre.

“The anti-scam centre needs to go well beyond the rudimentary efforts the banking sector has cobbled together to date,” Walker said.

“Given the years of inaction on scams by the banking sector and others, we believe the Government must also act to mandate reimbursement of scam victims unless those victims have been negligent and contributed to the scam in some way.

“It’s only when the banks and potentially other businesses are on the hook for scam losses that they’ll really step up and improve their systems. The Government must take the lead in bringing this about.”

In February, Bayly wrote to the NZBA, saying retail banks need to strengthen their processes to give Kiwis better safeguards from organised criminals.

He also instructed the banks to investigate a voluntary reimbursement scheme to improve consumer compensation, like that in force in the UK where banks are now required to refund customers who are tricked into authorising fraudulent payments to scammers up to a limit of £450,000 ($933,000).

Under current rules, NZ banks are not required to reimburse customers who authorise the payments unless banks have missed obvious “red flags”.

If banks fail to act by September, they risk having changes forced upon them through regulation, Bayly said.

Cross-border collaboration

Last week, Bayly discussed with his Australian counterpart Stephen Jones, Minister for Financial Services, how Australia is working to prevent scams and how the two countries can collaborate on cross-border scams.

“I acknowledge that Government must play a role and am actively engaged in discussions around what this might look like. However, I continue to urge banks to take strong action and use their full arsenal of tools,” Bayly told the Herald.

“I reject the idea that there is nothing further banks can do, and everything must be led by government.”

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.