Issues With Confirmation of Payee (CoP)

A recent article in the Observer newspaper (https://www.theguardian.com/money/2020/sep/06/who-am-i-a-bank-security-check-that-leaves-you-guessing-your-own-name) raised a number of concerns about the matching algorithms used by the banks for the Confirmation of Payee service.

The service is new and teething problems should be expected although I would have hoped that most of these would have been identified during the testing period and therefore been resolved prior to go live.

What worries me the most is the mention that 2nd named people on a joint account are treated differently to the first named individual. Let’s face it, most joint accounts are operated by partners (married or otherwise) and in the high majority, where it is a male and female combination, the women is the second named individual on the account and therefore CoP matching failed when trying to pay funds to the 2nd named person – is this another case of gender discrimination?

I understand the need for CoP especially in view of the potential risks should Tidal Energy vs Bank of Scotland have gone through to the Supreme Court (https://www.dacbeachcroft.com/en/gb/articles/2014/september/court-of-appeal-rules-on-the-proper-construction-of-a-chaps-transfer-form-tidal-energy-ltd-v-bank-of-scotland-plc-2014-ewca-civ-1107/). I also believe it right and proper that the banks push back liability to the payer where they have been negligent in overriding the non-match warnings but the Banks must get the algorithms right so that the payer is accepting a valid override not risking overriding when the banks haven’t got their matching in order.

There are underlying issues raised in the Observer report which in this current day and age should be addressed and that is the legacy banks insistence of the 18 characters for an account name – this dates back to the limitations of the original BACS Standard 18 format. As we look to move into the new world of ISO20022 and the demands of FAT-F this legacy limitation should be removed sooner rather than later and should be a major push that the Payments System Regulator should look to enforce. Only then can the matching algorithms expect to start achieving the success that it was meant to address.

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