Banks to start checking name of who you're sending cash to online
A new 'name check' service is being set up to tackle money transfer scams and lower the risk of online payments being sent to the wrong account – with some banks expected to start using it early next year.
The 'Confirmation of Payee' service has been developed by Pay.UK, which runs the UK's retail payment systems and oversees bank transfers and direct debits.
At the moment, when you make an electronic payment, the account name you put in isn't checked against the sort code and account number. Fraudsters can exploit this loophole by posing as someone else and tricking people into sending money to the wrong account.
But the new Confirmation of Payee system will double-check whether the name attached to a payment matches the sort code and account number, and warns you if it looks like you're about to send money to the wrong account.
It will be rolled out from early 2019, and the payment systems regulator hopes to make the service compulsory for all banks from July 2019.
For more info on preventing fraud, see our Stop Scams guide.
How does the service work?
We don't yet know when specific banks will be offering this service, and both the sender and recipient's banks will need to be using it in order for it to work on a particular payment.
But once it's up and running, banks will be able to check whether the name and other details of a recipient match whenever you set up a new electronic payment or make a change to an existing payment. It'll work whether you're making a payment to a company or an individual.
The service will be rolled out for Faster Payment transactions – which cover one-off online bank transfers and some standing order and forward-dated payments – first, although banks can also choose to implement the checks for other payments such as direct debits.
With this check, you'll be shown one of three answers:
- "Yes". The bank will confirm that the name and details match, and you can continue with the payment.
- "No, please check". If you've used a similar name to the correct account holder – for example, if you spelled their name wrong or used a nickname by mistake – the bank will tell you the actual name of the account holder. You can then either confirm that the name is correct and continue with the payment, or cancel the payment and contact the payee to check their details.
- "No, the name is wrong". If the name you've entered doesn't match the account details and isn't even close, you'll be advised to cancel the payment and contact the payee. You can still choose to continue with the payment anyway, but you'll be warned that this is at your own risk.
The checks will be carried out by the intended payee's bank.
How will the service protect me?
The Confirmation of Payee service means you'll get an extra alert if you are about to pay the wrong account. This helps to protect against certain types of payment fraud, where scammers convince people they are paying legitimate businesses but instead direct the money to their own account. It can also help to prevent payment mistakes, where the customer has simply entered the wrong name or details by accident.
At the moment, banks can refuse to refund money taken from your account if it can prove you authorised the transaction, or were at fault because you acted with 'gross negligence'.
The new system should help protect you, because if you are given a 'yes' confirmation when making a payment and later find out the payment was in fact made to a fraudster, you'll be able to show you took 'due care' in making the transaction – and so are more likely to get your money back.
However, the system won't protect against all kinds of payment fraud – for example, if a scammer tricks you into paying for goods or services which don't exist.
'A long-awaited step to keep consumers a little safer online'
MoneySavingExpert.com money editor Gary Caffell said: "This is a long-awaited step to keep consumers a little safer online – making it harder for push payment fraudsters, while also helping to prevent consumers accidentally sending money to an incorrect account.
"However, it's important you don't rest on your laurels as scams are always evolving and criminals are coming up with more inventive ways to try and trick you out of your cash, so you need to be as diligent as ever.
"Always check links are actually going where they should, looking out for extra characters in a web address that may take you to a near-identical site and remember, banks will never call or email to ask you for your full PIN or any passwords."
What does Pay.UK say?
Pay.UK chief executive Paul Horlock said: "Sending a payment with an incorrect sort code or account number is like addressing a letter with the wrong postcode. Even if you have used the correct name, it won't reach the intended destination – and fraudsters have become increasingly sophisticated in using this to trick people into sending money to the wrong account.
"Confirmation of Payee will let you check you have the correct name for the person or business you're paying, giving better protection against certain types of fraud, and helping to stop accidental mistakes too."