What is a payee?

In financial transactions between two parties, there is always a payee and a payer. A payee is the person who receives the payment from the payer. This could involve a direct bank transfer, a cheque, cash, or money sent via a smartphone app. To create an additional level of security to protect your finances, confirmation of payee (CoP) was introduced. What is confirmation of payee and which banks use it? Continue reading our helpful guide to discover everything you need to know.

What is confirmation of payee?

Confirmation of payee is a modern security feature that gives customers and businesses greater assurance that they’re sending payment to the intended recipient. It helps to avoid accidental, misdirected payments to the incorrect payee, as well as providing security against fraud and scams.

How does confirmation of payee work?

When sending money to an individual or a company, you now need to know their exact details, including their bank account number and sort code, and the name that is displayed on their account. The name that’s on their bank account may not always be the same as what’s displayed on their debit card, so always double check before sending the payment.

Once the details have been entered, either online banking or on the app on your smartphone, you will be notified by your banking provider that they are one of the following three:

• Match - all details are correct and the payee is the intended recipient.
• Partial match - if you’ve used a similar name to the intended payee, you might get this message and your banking provider can recognise the similarities and offer the correct name.
• No match - the details do not match. Return to the intended payee and check all of the details again.

Once everything is clear and all of the details of the payee are correct, you’ll be met with another screen which is the confirmation of payment. This allows you, the payer, the opportunity to review all of the details of the payee once again and double-check that you’re sending the correct amount of money.

This is another layer of security prior to pressing ‘confirm’ that gives you a final chance to make sure everything is in order.

Which banks use confirmation of payee?

In 2019, the UK’s biggest banks were ordered by the Payment Systems Regulator to sign up to confirmation of payee by March 2020. Because of the Covid-19 pandemic hitting the UK around that time, and full lockdown being enforced, the biggest banks in the nation were given an extended deadline of July 2020.

As of today, Bank of Scotland (which includes Halifax), Barclays, HSBC (including First Direct), Lloyds, NatWest, Royal Bank of Scotland, Santander, Nationwide, and Ulster Bank have all now signed up.

Previously, online banks like Monzo, Starling and Revolut had all signed up voluntarily, boasting another feature as they bid to compete with the biggest banks in the UK. There has been a rise of online-only banks in the past couple of years, and voluntarily signing up to things like confirmation of payee was another feature they could advertise to potential customers.

How confirmation of payee helps with making and receiving payments

Confirmation of payee has made banking and transferring your money safer than ever. In 2020, a woman who lost her entire life savings through a scam was able to get back £300,000 with the help of Guardian Money. Before confirmation of payee was introduced, her emails were hacked and the scammers acted as estate agents while she was in the process of purchasing a house. They managed to trick the woman into transferring all of the money for the house purchase while making her believe she’d sent it to the estate agents. Luckily, she was able to get all of her life savings back.

This shows the precariousness of transferring funds prior to confirmation of payee’s introduction. Had the service been available at the time of transfer, she would have been informed by her bank - prior to the confirmation of payment - that the details she’d entered were incorrect, saving her the stress and agony of losing so much money.

CoP is not just beneficial to individuals sending money, though. From a business perspective, a company’s finances can take an enormous hit if their money ends up in the wrong hands. A scam to the level of £300,000, like the lady mentioned above, could cripple some companies and force redundancies. This then impacts families who lose out on a steady income, thus proving how imperative it is for banks to offer confirmation of payee and confirmation of payment services.

Financial management services with Interbacs

Interbacs offers market leading Direct Debit solutions. As one of the first Bacs Solution Suppliers in the UK, we have a wealth of experience in delivering first-class Direct Debit systems. We have a range of products and services that utilise confirmation of payee that can help you to manage your cash flow, from our Bacs Approved Bureau to our InterPay Bacs payment services software.

Our direct debit solutions make signing up new customers a quick, easy and streamlined process. You can browse our complete selection online. If you require any more information or assistance, do not hesitate to contact us.