- Payments industry set for most radical set of changes since 1960s
- One change aims to help combat rising tide of financial fraud
- Expert says plans are ‘brilliant news’ for current account customers
The payments industry is set for the most radical wave of changes seen since the 1960s – partly in a bid to stop the tide of fraud facing current account customers.
The Payments Strategy Forum, whose members include consumer groups, businesses, fintechs, UK banks and building societies, has compiled a list of recommendations to offer greater security for customers and businesses.
The strategy proposes a key new safeguard called ‘confirmation of payee’ which it believes will help prevent financial fraud.
Payment protection: Banks, building societies, businesses and consumer groups have come together to build a strategy
It will allow people to avoid sending payments to the wrong account, either by accident, or being tricked into doing so, by ensuring a confirmation of the recipient is sent to the payer before any funds leave their account.
There has been a stark rise in a scam in which fraudsters over the telephone trick people into believing they are speaking to their bank.
They claim the victim has been the target of a fraud attempt and that their money needs to be transferred into a safe account.
This turns out to be an account opened by a criminal, who will then quickly siphon the cash away.
A confirmation of payee, in theory, would flag up that the account is in the name of a random person.
Ruth Evans, chair of the Payments Strategy Forum said: ‘Around £755million was stolen from UK bank accounts last year and the problem looks set to worsen as criminals become more technologically savvy. We need to address the issue head on.
‘Payments are the lifeblood of the UK’s economy. They underpin our daily lives, from the morning coffee we buy before work, receiving our salaries and pensions, sending cash-strapped kids loans for rent to avoid going into overdraft, to the purchase of our first home.
‘It’s important that we have the tools to protect ourselves and that we future proof our systems for generations to come.’
Last year, UK payments systems processed around 700 transactions every second, totalling £75trillion.
But, as banking in the UK evolves rapidly towards digital services, the existing systems present barriers for new providers and services which means customers can’t benefit from new technologies, the Payments Strategy Forum argues.
Another proposal is the introduction of ‘request to pay’. This will allow customers to authorise a regular payment, such as a utility bill or gym membership, before the company withdraws the money from their account.
This could be a huge boost to people on variable incomes who may struggle to settle their accounts at the same time each month.
The strategy also recommends the consolidation of the governance of three payment system operators, Bacs, Cheque and Credit Clearing Company and the Faster Payments Service, into a single entity to begin the process of simplification.
Hannah Maundrell, editor-in-chief of money.co.uk, said: ‘These plans are the shot in the arm the banking industry needs to drag its tech up to a standard that can cope with the demands and threats its customers face.
‘As soon as next year we should get extra information about where our online payments are going so it’s less likely you’ll send our cash to the wrong account or worse, into the hands of fraudsters.’
‘This is just the start, the ambitious reforms should make it far less likely you’ll be hit with hefty fees for missed payments, much easier for you to stay informed about where your cash is going, safer for you to bank online and simpler for you to change account.
‘It’s rare you read an official paper that seems to ‘get’ all of the issues and addresses them sensibly. Simply put, these plans are brilliant news for everyone with a bank account.
‘It’s not all roses, these reforms are really going to challenge data security within the banking industry.
‘With the recent attack on Tesco Bank highlighting hackers’ ability to exploit vulnerabilities it’s vital the banking industry steps up to this challenge and protects its customers against the real and growing threat of fraud.’