Last editedJan 20222 min read
Confirmation of payee is an account name-checking service that helps customers and businesses make payments safely. The process involves checking the name on an account matches that of the intended recipient before the payment is made.
This payee confirmation check ensures subsequent payments will not be sent to the wrong bank or building society account and helps combat fraud.
Banks using confirmation of payee
Most major banks including the UK’s six biggest banking groups have started using the confirmation of payee regulation since the summer of 2020, with now over 90% of bank transfers in the UK using the safety system. The confirmation of payee system was implemented after the Payment Systems Regulator (PSR) requested banks to do so.
The PSR’s Head of Policy, Genevieve Marjoribanks, said in a statement: “We want to see all banks, building societies and financial institutions give everyone the same levels of protection when they make payments.”
The banks using confirmation of payee include Lloyds Banking Group, HSBC and First Direct, Nationwide Building Society, Santander UK and the Royal Bank of Scotland Group.
Confirmation of payee considerations
At the moment, the confirmation of payee service cannot be used for BACS payments, including direct debits, though there are other safety measures in place for those payments, as described further below.
Also it should be remembered that confirmation of payee is just one of multiple ways to keep your payments safe. For it to work, it is crucial that businesses and customers keep their information up to date, and that you always have the full name of the person or business you intend to pay.
As well as a mismatch between the name of the person or business you’re paying and the name on the account you are paying into, other fraud prevention measures to keep in mind include any other changes to the account details, and anyone insisting or even just asking you to continue with a payment when the details do not match. Such behaviour should always be a massive red flag.
If confirmation of payee is not available for your transaction, then you must independently make sure that the account name details correlate with the person or business you are paying.
Other red flags include pressure to make a payment as well as payment requests from individuals or businesses you don’t recognise.
Direct debit without confirmation of payee
Customers or businesses using direct debit to make payments do not need the confirmation of payee regulation as the account details should have already been confirmed when the direct debit was first set up.
There is also the Direct Debit Guarantee which protects customers from payments taken in error. The customer paying through direct debit is entitled to a full and immediate refund from their bank in any instance of incorrect or fraudulent payments taken from their account.
The Direct Debit Guarantee has three ways in which it protects customers, which include:
Notifications
Refunds
Cancellations.
Notifications
Customers paying via direct debit are always notified before each payment is taken. Any failure of the recipient of the payment to follow this rule can potentially result in refund entitlement. Merchants can even be barred from the Direct Debit Guarantee scheme if they do not adhere to this rule.
Refunds
As briefly mentioned above, all direct debit customers are entitled to a full and immediate refund of any payment that has been taken in error by a merchant.
Cancellations
Direct debit users can also cancel their direct debit mandates simply by contacting their bank. Once the cancellation process is complete, any direct debit payments taken by a merchant must be refunded in full.
We can help
If you’re interested in finding out more about confirmation of payee, or any other aspect of your business finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.
