Confirmation of payee technology will be phased in between late November and Easter.
Banks will start introducing confirmation of payee from the end of November, with full implementation by Easter.
Experts see the service as a key measure to reduce scams. Consumer has welcomed the move but says “It’s shameful it’s taken so long” and called for those who’ve been scammed in the meantime to be reimbursed.
Confirmation of payee will be phased in over the next few months “to ensure proper testing and customer satisfaction”, NZ Banking Association chief executive Roger Beaumont said.
As a bank customer, you can expect to hear more from your bank about their approach and timing for introducing the new service.”
The service will let them check that the account name matches the account number. This will happen before the payment is made, Beaumont said.
It will make it obvious if a scammer purports to represent a bank when they are in fact asking you to transfer funds to the account of a person.
It also helps prevent fat-finger mistakes that see funds sent to the wrong account.
The new service will notify customers whether the account name and number match real-time bank records.
Customers will be provided with a match, partial match or no match notification.
Earlier this year, Consumer NZ called confirmation of payee “a simple step to stamp out scams”.
Banks had under-invested and been too slow to introduce the measure, Consumer NZ’s Jessica Walker said.
Beaumont said confirmation of payee required integrating different systems across multiple banks – a complex process that took time to get right.
In the meantime, all of the major banks have introduced warnings.
For example, ANZ’s app now warns: “This payment will be made immediately. Account name isn’t matched, verified or checked against account number.”
This morning, Walker said: “While it is good to hear that every New Zealand banking customer should have access to confirmation of payee by next Easter, it is shameful that it’s taken this long.
“International experience has long found that this is a system that helps protect citizens from being scammed.”
Walker added: “It’s been operational in the Netherlands since 2017, it led to an 81% decline in the number of fraudulent domestic bank transfers there.
“How much money have New Zealanders lost to scams that could have been prevented by CoP since then, and how much will be lost between now and the completion of the rollout?
“We think name and account matching should have been implemented well before now, and failure to do so means that banks have not been adequately protecting their customers. We think customers who have lost money that could have been prevented by confirmation of payee should be reimbursed.”
“It astounds me it has taken this long to implement this critical piece of security for their customers,” said North Shore real estate agent Carla O’Neil, who lost $100,000 to a scam (the Banking Ombudsman eventually ordered BNZ to refund her 70% of her losses).
“Along with the large group of victims in our support group and many more no doubt, would not have been scammed if confirmation of payee had been in place.”
O’Neil said the current setup had given her a false sense of security.
“I know I’m not the only one who thought the payee name and payee account number were checked - because why would the bank even ask for both if the name was irrelevant?”
David Wilson, a NZ First candidate and former chief executive of Northland’s development agency, who lost $200,000 in a bank scam, was also critical of NZ lagging behind a number of other countries.
Wilson, who was duped by a scammer working with a mule who had been paid $20,000 to create a legitimate account, said he wanted extra measures for banks to identify the ultimate beneficial owner of an account.
Banks should “stop hiding behind privacy laws, and apply the same level of scrutiny they apply to their customers on anti-money laundering and CFT [combating the financing of terrorism legislation] to themselves, then we might get somewhere”.
“Organised crime syndicates know where the weaknesses are in our banking system and target them. CoP will not address bank system inadequacies to prevent fraud. I know this from personal experience,” Wilson said.
The rollout follows Commerce and Consumer Affairs Minister Andrew Bayly threatening regulation if the sector did not get a wriggle on.
”This scheme [confirmation of payee] has been effective in the United Kingdom and Australia. I would like a confirmation of payee system introduced and am aware the New Zealand Banking Association is seeking to implement this,” Baly wrote in an open letter to the banking in February.
”I will be closely monitoring your progress and have asked my officials to keep me updated. I expect you to prioritise this work so that the system is operational as soon as possible, with rollout commencing by the end of this year.”
Last November, MBIE released a survey, based on data from the major banks, that said Kiwis had lost $198m to scams in the year to September 2023. This needs to change,” Bayly said.
The minister also asked banks to investigate an industry-led voluntary reimbursement scheme for victims of authorised payment scams.
“We are discussing next steps,” Beaumont said today.
On October 7, the UK introduced a new rule for mandatory reimbursement for victims of “authorised push payment fraud”, with banks required to reimburse a victim within five working days.
The UK’s new fraud rules are, on one level, a victory for consumer campaigners: make this a problem for the banks, rather than their customers, and the industry will be forced to invest in fraud prevention and share information to fight the UK’s number one crime on a scale never seen before, the Financial Times reported.
However, behind the scenes, banking bosses worry the new rules could cost them a fortune, the paper added.
The move toward mandatory reimbursement followed an industry-led voluntary scheme that had mixed results.
Last year, 62% of consumers had losses reinstated under the UK’s voluntary code of reimbursement, yet differing interpretations of the rules meant some banks refunded 96% of cases, while others managed just 3%”
The confirmation of payee technology build and integration of the new service differed across banks, so each bank’s testing and delivery phase looks slightly different, Beaumont said.
“It’s crucial that all banks gain assurance the system is working as it should, across their online and mobile banking platforms and services, before rolling it out broadly.
“This will ensure a smooth implementation, particularly in New Zealand, where so many people have more than one bank.”
“For customers, this means confirmation of payee might not be available across all online banking platforms simultaneously.
“They might find that a confirmation of payee check is available from some banks and not others, alternatively, it might be available on your desktop banking platform but not your mobile app, or vice versa.”
The phased approach was similar to how banks implemented confirmation of payee in the UK, Beaumont said.
On September 18, a new company was created called GetVerified, jointly owned by the major banks. GetVerified will serve as a vehicle for co-ordinating confirmation of payee efforts.
The technology provider is Obconnect, an open banking and confirmation of payee specialist based in the UK, where a confirmation of payee service is already up and running and credited with a drop in financial losses from scams.
Obconnect had at least one rival in the tender – fellow European firm Worldline, which earlier bought NZ’s Paymark.
While the new confirmation of payee service will help provide some reassurance to customers making domestic payments, banks are reminding customers to remain vigilant.
The system will not fully protect them from scams and criminals will continue to look for ways to trick customers into making payments, Beaumont said.
When making a payment to someone, it’s always a good idea to take the time to check why you’re making the payment and whether you can trust the recipient.
Banks participating in the new confirmation of payee service are ANZ, ASB, Bank of China, BNZ, CCB, The Co-operative Bank, Heartland Bank, ICBC, Kiwibank, Rabobank, SBS Bank, TSB and Westpac.
“We are joining a very small number of countries that already have a confirmation of payee service,” Beaumont said.
Confirmation of payee is one of a suite of anti-scam initiatives the banking industry committed to in September last year.
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.
ANZ stopped accepting deposits into others' accounts last year.