In the landscape of global payment systems, the UK has emerged as a pioneer in combatting fraud, particularly with its innovative tool Confirmation of Payee (CoP).
As payment professionals worldwide seek to bolster their fraud prevention strategies, the UK’s experience provides invaluable insights and lessons for extending verification of payee solutions, like CoP, globally.
Addressing misconceptions
Bottomline’s Frederic Viard
The notion of ‘Faster Payments, Faster Fraud’ is a common misconception, often rooted in the irrevocable nature of instant payments. Frédéric Viard, head of commercial product management – financial messaging at Bottomline, rightly points out that instant payments, once initiated, cannot be easily recalled or cancelled, leaving little time for verification.
However, Erez Nounou, product lead – risk solutions, financial messaging at Bottomline, emphasises that the speed of transactions does not inherently make them more vulnerable to fraud; rather, it is the lack of opportunity for pre-validation checks. This is something that will be remedied as part of the SEPA Inst mandate in Europe.
Value of pre-verification and fraud checks
Pre-verification tools like CoP, Bank Account Verification (BAV) and Verification of Payee are pivotal in preventing fraudulent transactions. Nounou highlights that pre-validation allows for upfront checks on payee details, providing a layer of protection before funds are transferred.
Additionally, regular fraud checks are essential for maintaining payment hygiene and detecting fraudulent patterns.
Standardisation and interoperability
Bottomline’s Erez Nounou
While different countries may implement similar verification schemes, achieving interoperability remains a challenge. Viard emphasises the need for a common rulebook, or standard, to ensure consistency across borders.
Achieving interoperability would enable seamless communication between different payment systems and enhance global fraud prevention efforts.
SEPA Inst: The challenges and opportunities
The SEPA Inst mandate presents both challenges and opportunities for European banks and financial institutions (FIs). Viard underscores the importance of determining the model for implementing Verification of Payee at a cross- border level, ensuring efficient and secure payment processing within the EU.
Leveraging ISO 20022 for enhanced fraud mitigation
The adoption of the ISO 20022 standard brings enhanced data structuring, reducing room for error and improving fraud detection accuracy. Structured data enables more focused fraud checks, reducing false positives and enhancing overall efficiency in fraud mitigation efforts.
Toward a global framework for fraud prevention
As the global payments landscape evolves, there is a growing need for a unified approach to fraud prevention. While challenges persist, such as standardisation and interoperability, lessons from the UK’s experience with CoP offer a roadmap for payment professionals worldwide.
By embracing pre-verification tools, leveraging standardised frameworks like ISO 20022, and fostering collaboration, the industry can work towards a global standard for mitigating fraud and ensuring secure payment ecosystems.
This article was first published in ‘Rising to the Fraud Challenge 2024’, an Open Banking Expo report in association with Bottomline. Download your copy of the report here.
