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Confirmation of Payee scheme extension: what financial institutions need to know



Chris Mullins, Senior Product Manager, Form3


Innovations in payments undoubtedly bring greater convenience and assurance to payment services providers’ (PSPs) customers. However, the planning and implementation of these innovations – as positive as the outcomes are – often lead to complexity and investment for the banks themselves.

Back in May, the UK’s Payments Systems Regulator announced that it would be undertaking a consultation to expand the Confirmation of Payee (CoP) scheme. This consultation focused on directing approximately 400 PSPs to implement CoP. While this is good news for end customers, it could cause challenges for the smaller banks and fintechs in the UK who lack the resources, time or expertise to get involved in the scheme.

In this article we’ll set out why it is a good idea for PSPs to sign up for the scheme, while providing context for the reasons for the extension and answering some key questions about CoP.

What is CoP and what are key dates?

In simple terms, CoP is a scheme that checks the account details of the person or business being paid before any payment is made. The benefit of the scheme is twofold; firstly, it gives personal and business customers greater certainty that the payments they make are going to the right recipients. Secondly, it provides additional protection against fraudulent payments — at least in theory, as there is still some uncertainty about just how effective CoP is in combating APP (Authorised Push Payment) scams.

It’s been available for customers of some banks when making payments via Faster Payments and CHAPS since the first half of 2020. The proposed extension of the scheme will see the number of participants increase from 33 today to somewhere around the 400 mark, meaning that many more customers will potentially benefit from it.

In terms of timings, while the consultation has recently closed, we’re not expecting to hear more details until later this year, and the two-phase roadmap for the scheme runs into 2024. Some 46 PSPs will take part in the first phase in 2023, the remainder will join the following year. And while that may seem far enough in the future for some PSPs to kick their strategic planning for CoP into the long grass, to do so would be a mistake.

Why should financial institutions apply for the scheme?

From the customer’s perspective, being a victim of any kind of fraud is a deeply upsetting experience. Banks should be looking to implement any new innovation that can lower the risk of their customers becoming victims of fraud — it’s a no-brainer. In order to protect their customers and their own reputation, financial institutions should be getting on board with the extension of CoP. Benefits of joining CoP for PSPs include:

  • Avoids the risk of being cut off from receiving payments and hence account holders not being able to receive funds
  • Avoids potential loss of new business as customers look for this when signing up
  • Reduced operating costs of dealing with fraud cases and misdirected funds
  • Provides customers with greater confidence in moving funds

What challenges will new entrants face and how can these be overcome?

There are a number of friction points and challenges that PSPs who want to be part of the extension of CoP will need to overcome. For a start, there’s the need to meet various terms and conditions set out by Pay UK and Open Banking. On top of this, they’ll need to either build their own system for handling CoP into their existing infrastructure — which will require considerable expenditure and expertise — or find a third-party provider who can help them. Additionally, they’ll need to test their system ahead of launch, as well as managing it on an ongoing basis.

For those institutions that don’t have the time, money and resource to build their own system, finding the right third-party technology provider is key. This provider needs to be capable of taking on the implementation, testing and ongoing management, as well as the technical responsibilities set out by Pay UK. Therefore, a rigorous selection process should be a priority for any institution that wants to take part in the scheme.

Will CoP mean financial institutions bear more responsibility for protecting customers?

Payment Service Providers have a duty of care towards their customers and CoP means that they can increase the protections they offer to payers. They also have a responsibility to educate their customers about the kind of scams that are being actively used by fraudsters right now, and also about the importance of using CoP. Even with CoP in place, there are ways that scammers could persuade customers to make fraudulent payments — by asking them to ignore a “no match” response for example — so it’s crucial banks do as much as they can to keep their customers informed.

The original judgement of the recent Phillip vs Barclay court case, which involved a significant case of APP fraud, was overturned on appeal and has shifted the perception of what ‘duty of care’ entails for banks. At the centre of this highly complex case was a conflict between the bank’s duty to carry out a customer’s instruction and the bank’s duty to withhold a payment when on notice of a potential fraud. The case starkly highlights the need for financial institutions to take their responsibilities towards their customer very seriously.

In terms of fraud prevention, there is still a great deal of uncertainty about just how effective CoP is in combating APP (Authorised Push Payment) scams. According to a poll of industry insiders conducted by UK Finance, 43% felt that the value of using CoP to help tackle APP fraud had been neutral at best if not useless.

Of course, effectively combating fraud will take more than just extending the CoP scheme. The burden of preventing fraudulent payments can’t lie on CoP alone; there also needs to be additional checks against fraud databases, better screening at payment initiation and deep analysis of incoming payments to identify mule accounts.

Linked to fraud prevention is reputational damage to financial institutions. There is a degree of nervousness within the industry regarding this. We’ve heard of cases where some financial institutions are not allowing transfer of funds to institutions that are sitting outside of CoP at the moment. And if your customers can’t receive funds from other banks, then they are not going to be very happy.

Will the extension of CoP be a success?

Bearing in mind that 92% of volume is already going through CoP, the extension of the scheme is about closing out the remaining 8%. It remains to be seen whether it’ll be extended to the full 400 financial institutions, but the first phase of the extension will only involve 46 more banks. It’s the second phase, due to take place in 2024 where most of the question marks lie, concerning whether some of the smallest institutions will get on board. Overall, though, the fight against fraud will need to involve more than just the extension of CoP, but it will help support this, helping to enhance financial institutions’ reputations.


In-platform solutions are only a short-term enhancement, but bespoke AI is the future



By Damien Bennett, Global Director, Principal Consultant, Incubeta


If you haven’t heard anyone talking about artificial intelligence (AI) yet, then where have you been? Conversations about AI and its advantages to society have been a key talking point over recent months, with advances being made in the generative AI race and ChatGPT opening a whole plethora of possibilities. Many have highlighted the advantages of AI, but notably it’s ability to create human-like content.

But these discussions have only scratched the surface of what AI is capable of doing. It is for far more than just essay writing, adding Eminem to your rave and photoshopping dogs into pictures.

In marketing, we have been using AI for years, for everything from analyzing customer behaviors to predicting market changes. It’s enabled us to segment customers, forecast sales and provide personalized recommendations, having a huge impact on how our industry works.

It is even, for the more savvy marketers of the world, becoming a key tool in maximizing budget efficiency – which is apt, considering over 70% of CMOs believe they lack sufficient budget to fully execute their 2023 strategy.

Now, as AI becomes more intelligent, the number of efficiencies it can unlock continues to rise. Not only can it help brands get the most out of their available resources and identify any areas of waste, but it can also help highlight new opportunities for growth and maximize the impact of your budget allocation.

The trick, however, is to veer away from the norm of using in-platform solutions with a one-size-fits-all approach and create your own, bespoke solutions that are tailored to your business needs.


Pitfalls of in-platform solutions

In-platform solutions aren’t by any means a bad thing. In fact, built-in AI tools have become increasingly popular, owing to their ease of integration, user-friendly interfaces and minimal set up requirements. They come pre-packaged with the platform, offering the user the ability to leverage AI technologies without the need for in-depth technical expertise or the upfront cost of building a solution from scratch.

However, the streamlined and accessible nature of in-platform AI solutions comes at the expense of complexity and customization. They are designed to serve a broad user base, but for the most part are built using narrow AI solutions with predefined features and workflows.

This makes them great for assisting with common AI tasks, but they lack the flexibility to tailor functionality towards unique business requirements or innovative use cases, limiting the potential efficiencies and cost savings that can be unlocked. Additionally, if a business’ competitors are using the same platform, they are probably using the same AI solution, meaning any strategic advantage gained from these will be reduced.

Bespoke AI solutions, on the other hand, may carry a higher initial investment – but can offer a significantly more attractive ROI over a short amount of time.


Why customized and adapted AI is the key

The difference between bespoke AI and in-platform solutions is similar to that between home cooked food and a microwave meal. Yes, it is more time consuming to prepare, and yes it likely carries more of an upfront cost, but the end result is going to be far more appealing and will carry more long-term value (financially… not nutritionally).

That’s because bespoke solutions, by nature, will have been tailored to address your brands specific needs and challenges. These custom-built tools allow for much greater efficiencies by streamlining workflows across different channels, automating more complex tasks, and providing deeper, more relevant insights.

The increased level of optimization can significantly improve productivity and reduce operational costs over time, offering a higher ROI. The increased flexibility of bespoke AI also allows brands to implement innovative use cases that can significantly differentiate them from their competitors.

The data analyzed can be specifically chosen to match business requirements, as can the outputs of the AI tool, providing a significant advantage when understanding and acting on the insights provided.

Additionally, these tools are, by nature, more scalable. They can be updated, upgraded and expanded as needs change, ensuring they continue delivering value as the business grows. They can also be designed to integrate with any existing IT infrastructure, from CRM systems and databases to marketing platforms and sales tools – leading to more efficient and effective decision-making.


Managing finances with AI

It’s no secret that AI in marketing automation has, and will continue to, revolutionize the way marketing is done. It has a bright, if slightly terrifying, future and can help CMOs to unlock new efficiencies, maximize the impact of their budgets and increase their ROI. And as this technology becomes more advanced, its impact will only increase.

But we already know that…and so does everyone else.

So, in order for businesses to make themselves stand out from the crowd , they must look to fully adopt the power of AI. Creating a customized and unique AI solution could be the way to set yourself apart from your competitors. A bespoke AI tool can provide brands and businesses with features unique to them and their business needs. As a result, companies will benefit from more useful data and better results to make more data-driven decisions for their business. Ultimately, this will help brands to maintain a competitive edge over their competitors, deliver ROI and most importantly optimize their budgets.

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Is your business suffering with Fintech FOMO?




FinTech Trends In 2022

Tom Kiddle, Chief Commercial Officer at Equals Money


It’s a challenging time for businesses of all sizes, but the past three years created storms that are particularly hard for SMEs to weather. For businesses dealing with shrinking margins, while a weakened pound is making international purchases more costly, it’s a scary time.

For many businesses this meant initially reigning in any unnecessary costs, reducing investment in anything deemed as a ‘nice to have’, and focusing on keeping the lights on. However, despite not being out of the woods in terms of economic challenges, this year many SMEs have their eyes on growth.

While some might have been buoyed by the news that the UK narrowly avoided a recession at the end of last year[1], data shows businesses were already making investments before this news was released. In fact, UK business investment rose by 4.8% in Quarter 4 (Oct to Dec) 2022, coming in at 13.2% above where it was during the same quarter in 2021[2].

So, where are SMEs putting their cash? As well as predictable spending on IT equipment, machinery, and transport[3], businesses are also putting more funding than ever into technology investments – a trend that isn’t slowing down anytime soon. UK tech investment is set to grow at its fastest rate in over 15 years, both in terms of budget but also headcount[4]

Tom Kiddle

UK businesses are clearly seeing the real opportunity that technology, in all its various forms, presents to their operations. This may also be bolstered by the fact that tech investments are potentially more cost-effective now that the government has made recent changes to R&D tax relief, which sees things like cloud computing and data included in expenditure categories[5]. When it comes to revamping legacy systems and introducing Fintechs that offer businesses a smarter, easier, automated way of doing business, investing in technology can increasingly feel like a no brainer.

However, it’s rare that a one size fits all solution exists for businesses. What works for your competitor may not offer the same benefits to your organisation. In a world with so many risk factors, making smart investments that are aligned to your individual business goals is key.

Tom Kiddle, Chief Commercial Officer at innovative money movement solution Equals Money, explains four ways businesses can reap the rewards of smart tech investments:

1. Measurement

Can you measure the impact it will have on your business? It doesn’t have to be monetary, but if it gives you efficiency, visibility, or certainty, these can have measurable tangible impacts to your top and bottom line.

2. Insight

Does it tell you something you didn’t know before about your customers, your employees, your suppliers, and their behaviour?  What could you do with that information? Often, businesses lack critical insight on their key drivers, and understanding those can open up new opportunities.

3. Action

Pretty charts and graphs make for good reading, but make sure you’re taking action with your new piece of tech. Setting accountability for action from your latest investment will drive your business to achieve a return on that investment and ensure it doesn’t sit on the shelf.

4. Adoption, adoption, adoption

Often, the latest tech trend may seem like a great investment to the motivated few, but look more broadly: if your intended internal target for your new tech fails to adopt the new practice, you won’t achieve the return promised. Also, more likely than not, you’ll frustrate both the key supporters of the new product and those you’re imposing it on.

Innovative technology, particularly in the finance space, can transform the way you do business, but avoid being lured in by solutions that don’t align to your individual needs. Good suppliers should always take the time to give an honest appraisal of whether their product is right for you and should leave you feeling empowered to devote time to what matters most – growing your business.


[1] HR Solutions, 2022 [2] The Guardian, Feb 2023 [3] ONS, Dec 2022 [4] ONS, Dec 2022 [5] Nash Squared Digital Leadership Report, 2022 [6] BDO, 2023 [1] The Guardian, Feb 2023 [2] ONS, Dec 2022 [3] ONS, Dec 2022 [4] Nash Squared Digital Leadership Report, 2022 [5] BDO, 2023

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