New Zealand consumers are losing nearly $200 million a year through scams, Consumer says. Image / 123rf
New Zealand consumers are losing nearly $200 million a year through scams, Consumer says. Image / 123rf
A confirmation of payee (CoP) system that would make it much harder for fraudsters to scam Kiwis could be a step closer with a payments provider pitching a solution it says is proven in the United Kingdom.
This year, Worldline, formerly known as Paymark, is workingwith a firm called Surepay to launch a confirmation of payee service in New Zealand, which has been provided to banks in Europe since 2017 and is today used widely in the UK
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.
It works like this: If you believe you’re about to make a payment to Jane, but the bank account you are sending money to is registered to Mr A. Naughtyman - as Consumer put it - the CoP process will flag the discrepancy before you make the payment.
Worldline executive Bruce Proffit told the Herald that CoP will also throw up a red flag if you think you’re paying a company but the recipient’s bank account is actually held by an individual.
It can also raise a yellow flag if a name is a letter out, or an account number a digit wrong, helping to prevent a fat-fingered transfer of funds to the wrong account.
Netsafe thinks a “confirmation of payee” or a service that matches a name to an account number when you put through an online bank payment - would go a long way to kneecapping fraudsters.
Consumer NZ calls CoP system (as it’s known in industry-speak) “a simple step that will stamp out scams” - or, specifically the so-called “authorised push-payment scams” that have cost many Kiwis six-figure sums and, collectively, a staggering $198 million in the year to September 2023, according to an MBIE survey that drew data directly from our major banks.
Confirmation of payee ‘overdue’
“This should have happened years ago,” Consumer chief executive Jon Duffy told the Herald.
“New Zealand consumers are losing nearly $200m a year from scams - many of which should be prevented by known fraud prevention measures. The banks just need to invest. [That] $200m a year is a drag on our economy.”
Duffy said banks had heavily invested in protections around unauthorised fraud - such as when someone steals your credit card details then racks up charges - because they were on the hook to repay the victim. Making banks liable for authorised payments where fraud is involved - as is the case in the UK - would focus minds, Duffy said. But he added there should be caveats. For example, a bank should not be on the hook if a customer had been negligent.
The Consumer boss understood banks were now working on a confirmation of payee solution. “I applaud that,” he said.
“But it needs to be done in double-time to make up for years of under-investment.”
“This should have happened years ago" - Consumer NZ chief executive Jon Duffy.
So what do the banks think?
The major banks’ position remains: We think CoP is a good thing and we will implement it - but there are several tricky elements and we can’t say when.
“Implementing a confirmation of payee service is a key priority for the industry,” NZBA chief executive Roger Beaumont told the Herald this week.
“Getting confirmation of payee designed, built, and implemented across the banking industry will be determined by a number of factors, including agreeing an account name and number matching solution, and ensuring it can be delivered by our retail banks.”
The solution will also need to comply with privacy law and banks’ obligations to protect customer confidentiality, Beaumont said.
“Banks will need to build and implement relevant changes to their online banking and mobile app platforms. Getting confirmation of payee to go live will depend on addressing all these elements.
“At the moment we’re assessing a number of options to build our own confirmation of payee solution, or partner with a third-party technology provider, of which there are several in New Zealand and overseas. To help us determine if there are any suitable third-party solutions, we will be seeking proposals from potential providers.”
Banks have already taken a number of steps to increase their anti-scam initiatives Beaumont said, including expanded anti-fraud teams and ramped-up education efforts.
Speeding things along
Proffit knows the lay of the land. Before Paymark was bought by Worldline, it was collectively owned by NZ’s major banks.
He said there were two ways of implementing a confirmation of payee system - whoever ended up putting it together.
One was an application programming interface-based solution that let banks share name and account information in real time. That would address the concern that some customers have about a CoP system delaying transactions. But getting banks who have different customer relationship management systems - of varying ages - to talk to each other would be a multi-month, complicated and likely expensive mission.
If the bank CRM is not accessible, a data service could be provided to the banks to get a CoP solution in sooner.
While the NZBA mulls alternatives, Netsafe has teamed with two local fin-tech start-ups, Akahu and Dolla, to offer an app-based confirmation of payee service. Akahu offers a “confirmation of payee” service via Dolla’s that matches bank account names and numbers. This is free to use for individuals who make payments through the Dolla app.
There is a key limitation, however: Dolla - via Akahu’s work as an intermediary for various accounting systems, and other sources - has access to name and number details for around six million NZ bank accounts, but that is only around half the total, and in some cases it is only partial data.
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.
