Under the UK's mandatory reimbursement rules, PSPs — not consumers — are now liable for APP fraud losses. The most effective way to reduce that liability is using an accurate Confirmation of Payee (CoP) algorithm.
With the new regulatory plans, the role and financial responsibility of Payment Service Providers (PSPs) will change. It will become increasingly important that PSPs use a Confirmation of Payee tool with the very best and most reliable algorithm. Without one, the financial and reputational damage can be immense.
- PSPs are now liable for APP fraud losses
- Refunds must be issued within 5 business days (or 35 days for complex cases)
- Accurate CoP tools reduce false positives/negatives
PSR's mandatory refund rules for APP fraud
The Payment Systems Regulator (PSR) plans to introduce a mandatory refund for victims of Authorised Push Payment (APP) fraud. APP fraud is when a victim is tricked into authorising a payment to a fraudster.
The PSR's proposed refund scheme aims to provide greater protection for consumers and increase confidence in the payment system. APP fraud is the largest type of payment fraud in the UK, with losses totalling £249.1 million in the first half year of 2022. Despite the overall decrease in APP fraud, the amount returned to customers has increased, rising by 11 per cent to £140.1 million in the first half of 2022 or 56 per cent of the total loss.
Source: UK.Finance
The main change for PSPs is that they will be liable for fraud. With a Confirmation of Payee tool, a huge amount of fraudulent payments can be prevented. But one thing is crucial: PSPs have to be sure that the algorithm behind the tool is up-to-date and fully reliable. If it is not, the financial and reputational damage can be immense.
Why Confirmation of Payee prevents APP fraud
The PSR's proposed refund scheme is an important step towards improving consumer protection in the payment system and reducing the impact of APP fraud. However, prevention remains the best defence against fraud. Currently, only 46% of total APP fraud losses are reimbursed to the victim, highlighting the need for greater consumer protection in the payment system.
With SurePay's Confirmation of Payee solution, consumers can take an active role in protecting themselves when making online payments, giving them peace of mind and security. The solution makes payments even more secure by verifying that the payee's name and account number match.
This verification process provides a notification if there is a mismatch, allowing users to verify that they are paying the right person or company. A particularly useful feature in preventing APP fraud, as it ensures that the recipient of a payment is legitimate.
How SurePay's Confirmation of Payee algorithm works
Under the Payment Systems Regulator's proposed scheme, victims of APP fraud would be reimbursed by their payment service provider (PSP) — unless the PSP can prove that the victim did not take reasonable care to protect themselves.
Refunds would be made within 15 working days after the fraud is reported to the PSP. The PSR's plans also include measures to prevent and detect fraud, such as improving the ability of PSPs to identify and block fraudulent payments.
So, using a Confirmation of Payee tool is one of the most effective measures PSPs can take.
SurePay's Confirmation of Payee matching algorithm combines cutting-edge data science techniques with in-depth knowledge of transactions and payer behaviour to help prevent fraud and errors while facilitating Straight Through Processing.
The SurePay algorithm is built from the ground up specifically for Confirmation of Payee. Each check is accurate to avoid false positives or false negatives.
Matching names sounds simple, but it's actually quite complex. For example, the algorithm recognises that "Elisabeth" matches "Betty," a common nickname variation that a simple text-matching check would miss. It also accounts for initials, joint accounts, abbreviations, truncations, names out of order, and many other human inconsistencies. These matches and close matches can only be recognised by the SurePay algorithm.
SurePay's Confirmation of Payee accuracy and scale
SurePay performs over 600,000 checks per day in the UK. In addition to experience, SurePay has one of the highest "match" and "close match" rates in the market. This demonstrates the confidence and security of SurePay's algorithm. Also, SurePay has worked closely with Pay.UK to launch its Confirmation of Payee solution, which has been instrumental in reducing the impact of APP fraud in the UK.
With the PSR's proposed refund scheme and the benefit of SurePay's Confirmation of Payee solution, consumers can feel more confident and secure when making online payments.
