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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.


Crypto’s tipping point




Chris George, Senior VP of Product at Somo argues that Crypto needs to improve its scalability to be taken seriously

Cryptocurrencies are no longer the exclusive domain of high risk financiers or tech Bitcoin jockeys, willing to ride a niche and volatile asset for good or ill. Today, neobank and mainstream banking apps alike offer crypto banking, helping them trade in Bitcoin or Ethereum from as little as one dollar(

Indeed, in September 2022, Finbold reported that British citizens had invested nearly £32bn in cryptocurrencies, and additional research from HMRC would have it that one in 10 UK adults has bought crypto, double the number from the previous year. 

But even given the legitimacy lent to crypto by the fact that now 50% of UK banks allow customers to interact with these currencies as well as other digital assets, how can the asset management industry turn it into a significant – and mainstream – asset, particularly in today’s turbulent economic climate? With the collapse of FTX, this must be taken into serious consideration. FTX was sold as being a safe and stable way to trade digital currency, alas this has not been the case. It turns out Sam Bankman-Fried seriously over-promised and dramatically under-delivered, gambling away customer assets and ultimately prioritising fraud and malpractice.

First, we need to acknowledge that not all crypto is created equal. Some, such as Bitcoin or Ethereum, do function as a currency, are limited in volume and therefore can increase and (as 2022 amply showed) decrease in value. But other blockchain-based crypto doesn’t behave like what most people commonly accept as currency at all. 

For there to be significant uptake in crypto as an asset, there is going to have to be a far broader and deeper understanding of what it is and what it can do. As Christophe Diserens, chief compliance officer at SwissBorg has suggested: “Value and useability are going to be key. Metcalfe’s Law has been used to value tech and internet stocks so why not crypto?”. That value took a bit of a beating during the recent sell-off and crypto’s perceived volatility will need to be addressed if it is to achieve scale. Because that’s what it’s going to need if it’s ever going to be considered as a legitimate global payment alternative in the future.


The role of The Merge

Not the latest B-movie, sci-fi flick, The Merge in September 2022 saw the world’s second-biggest cryptocurrency, Ethereum, move from a ‘proof of work’ to a ‘proof of stake’ protocol. This was nothing short of seismic. 

Proof of work is how the vast majority of crypto has been mined to date. People solving complex equations to validate transactions (the ‘work’) uses masses of computer processing energy, accounting for a significant slice of the world’s electricity consumption. In today’s climate (in both senses of the word), that’s just not on. 

Proof of stake, on the other hand, relies on far fewer ‘miners’, fewer computers and less energy as a result. This so-called ‘Merge’ is not only expected to reduce worldwide energy consumption by 0.2%, but also boost the crypto economy as a whole, creating more opportunities for investors and allow developers to build more products and applications on Ethereum. Ultimately, it could be what drives the decentralised internet of blockchain, crypto and NFT – Web3 – mainstream. 

What does this mean in the ‘real’ world? This could present a real opportunity for the financial services sector as a whole. It will change the way it operates, speeding up transactions, creating new business models and generally just making the whole thing a more efficient way of working. Fully cashless payments for business would be a real boon, given the costs and potential losses involved in transacting in cash. Digitisation also makes transacting an altogether more intuitive experience. 

One thing crypto and its associated technologies and solutions needs to be wary of is becoming a solution in search of a problem. For a truly mainstream breakthrough, the industry needs to make sure it’s bringing the consumer along on the journey. For end users to be truly confident in crypto, it has to benefit from the same levels of governance and regulation that cover the rest of the financial services industry, building and maintaining consumer confidence will be extremely important as trust levels have been shaken by the recent lack of solid administration and “irresponsible lending practices” leading to the FTX implosion . It has to be simple to transact, but with all the protections that investors have come to expect. It can’t afford to take them on another rollercoaster ride like 2022’s. 

While 50% of the UK’s banks may be getting on board with crypto to some degree, there is still a wide open ocean of opportunity for asset management players to realise value for themselves and their clients. It will involve some reshaping and more investment in digitisation to manage the assets of the future, whatever they may be. 

Somo, part of the CI&T family, will be publishing a report titled ‘Assessing the Crypto Conundrum: Will cryptocurrency ever be a significant trading asset and how can digitalisation shape its future?’ in 2023. 

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Skedadle to change the game for advertising with Currencycloud partnership




Currencycloud, the experts simplifying business in a multi-currency world, has partnered with Scottish start-up app Skedadle to provide its users an easy, secure and seamless way to transfer money earned in-app while playing games on public transport.

Skedadle rewards travellers for the time they spend playing on-the-go. They can earn £2 per day simply for playing games on the move. That’s an extra £60 in their pocket each month. This can be done thanks to a disruption in the advertising market, by using algorithms to verify and track the users’ engagement with ads, proven to be higher while playing than in traditional online advertising, which increases product and brand recall for advertisers. Thanks to the partnership with Currencycloud, Skedadle users can use the app on public transport and be reassured that all financial transactions and financial data comply with the highest standards of security and validations.

By connecting to Currencycloud’s API technology, Skedadle has been able to integrate in their app a state-of-the-art payments ecosystem that seamlessly bulk settles the money earned from advertisers into a secure account and then processes withdrawals from users fast. At the same time, Currencycloud also sets the infrastructure that will enable them to grow both geographically in the UK and globally, by providing access to 38 currencies and low cost, fast FX rates.

Says Nick Macandrew, CEO and Founder at Skedadle: “Trust and security are crucial, especially when it comes to people’s money. As we rapidly grow our platform, we need a solution that can keep up with our pace and Currencycloud do just that. Our cutting-edge technology requires a secure, stable, and simple way of managing payments, whilst guaranteeing the best user experience possible.”

Nick Cheetham, Chief Revenue Officer at Currencycloud commented: “Backing bold start-ups from day one has always been part of our DNA. Skedadle’s creation of new revenue streams for travellers and advertisers alike is an exciting business endeavour. We are eager to see how the  platform can grow and disrupt the market by integrating our seamless payment capabilities.”

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