Transcript: Confirmation of Payee: building an industry solution

00:00 Dave: Welcome to the Australian Payments Plus Point of View podcast, where we explore the theme of trust from many different angles. Today, we'll be exploring Confirmation of Payee, a new service that rolled out earlier this month across Australian banks. 

I'm joined today by Tina in the room here and by Anu remotely from the UK. Tina has over 15 years of financial services experience across Canada and Australia, including 10 years in payments. Over the last two years, she has led the design, build and implementation of Confirmation of Payee, collaborating with over 100 banks across Australia to make it happen. 

Anu is product owner at Pay.UK for Confirmation of Payee. She is a payment specialist with over 25 years of experience in global financial services and has worked in India and the UK. She is focused on providing a world-class customer experience, along with offering services in the most safe and secure environment. So Tina and Anu, welcome.

01:01 Tina: Thank you. 

01:02 Dave: Great to have you on. 

01:03 Anu: Thank you, Dave. 

01:06 Dave: So I'll start with a question for both of you. So, what does trust mean for you? Maybe Anu, we'll start with you.

01:11 Anu: Simply put, I would say for me, trust is all about faith, trust is all about faith. reliable, safe, and every act that makes me want to believe in a person or a process. And for us in the financial world, I would say trust is all about keeping my hard-earned money safe and secure. That would be trust for me.

01:32 Dave: Great. And for you, Tina?

01:34 Tina: Yeah, I would kind of agree with a lot of that, actually. It's almost like we compared notes beforehand. But I think probably it comes down to like how you would also treat like a relationship, right? Like you have trust in the person until you don't have trust, you know, so you're building upon that as part of a foundation and then you just build on it and build on it and build on it and just know that they've got your best interest at heart, I think.

01:55 Dave: All right, so you're giving trust. And then, you know, I think that's an important thing from a customer's perspective, right? Like give trust to banks, give trust to financial services. So I can see why that's important. 

02:05 Tina: Absolutely.

02:06 Dave: So, Tina, we'll start with you. 

02:07 Tina: Yes.

02:08 Dave: Can you explain to us what is Confirmation of Payee and why is it being introduced in Australia?

02:14 Tina: At the moment, we are seeing a large amount of scams, losses in Australia, and it kind of came back really badly in 2023 when we saw a massive amount of $3.1 billion lost. 

02:25 Dave: Wow, huge number. 

02:26 Tina: Huge. And so I think there was a lot of pressure on the banks to do more, mainly from government, from regulators, from the media, but particularly from consumers. And so Confirmation of Payee, as we've seen in the international market, has been a big factor in trying to curb that.

And so that's kind of the reason why we're bringing it into Australia. And I guess it's part of the overarching Scam-Safe Accord that is being implemented by the ABA and in conjunction with us to deliver this Confirmation of Payee solution to the Australian market.

02:55 Dave: Yeah. So, I mean, industry has been working on this for a little while. So what does that involve, you know, working with the industry?

03:03 Tina: So we've been through about 90 hours of workshops with the industry.

03:07 Dave: 90, just 90?

03:08 Tina: Yeah, just a small number where we've spoken to them around really, really broad things from the very beginning where we're talking about, you know, what does the API look like? What kind of data is being carried? How does it work? What rails will we use? But then getting into the nitty gritty as well around like, you know, what's the CX going to look like? And one of the key things that we heard from the Pay.UK team was making sure that you get that CX, customer experience right at the beginning, right? That was one of the key call outs that they gave us. 

And so I think making sure that we could land that early on was really important. Obviously, trying to get a 100 and something banks in Australia to agree to things is difficult at times. 

03:48 Dave: Yeah, interesting. 

03:50 Tina: Interesting is a word. But I think as well, if you think about how much the banking industry has come together to collaborate and share as much as they have, and to bring something to life after only two years is actually a remarkable achievement. 

04:06 Dave: Yeah. And just one final question for the moment. How long did it take from ideation through to going live? 

04:11 Tina: It was just over two years, which is pretty incredible to be honest. 

04:14 Dave: Pretty quick repayments. 

04:14 Tina: Very quick for payments. And very quick for big banks to make big changes, right? 

04:20 Dave: Yeah. And so Anu, as we've just heard from Tina, we were just about to embark on Confirmation of Payee in Australia. But in the UK, you've had confirmation of payee a bit longer. So what led to the development of this in the UK? Was it industry led, government-led, I'm keen to hear more. 

04:39 Anu: So it's been five years of launch, and we are kind of celebrating the five years of launch of COP here in the UK. And yeah, when we started, again, there was a mandate, as we called it, or a direction from PSR to big six banking organisations saying they needed to implement it by a certain time. So there was a timeline provided by PSF for these big six banks.

PSR then issued a second mandate in October, 2022, realising the value that COP was bringing and literally directing 360, I think the first list might have been 394 if I remember top of my head. Requiring all the payment service providers here in UK to implement COP by October 2024. So it's been a journey, I will not say that it has been very easy and it's been one big bang. We've learned from it, we've corrected our mistakes every time possible and then more importantly we have shared it with everyone like yourself and other peers who are into the journey after us, as we did this mistake guys, don't repeat it, learn from it and try to get it right the first time. 

05:56 Dave: You just said so five years into the journey for Confirmation of Payee in the UK, so what's been the experience you've had today and what impact has it had on mistaken payments and fraud? 

06:08 Anu: When we started, the first month we had 14,000 messages exchanged. First month of COP was 14,000, and today we are averaging 65 million messages a month. That works out more than 2.1 million checks a day. which currently works out as 23, 24 checks per second. 

06:36 Dave: Wow. 

06:37 Anu: So I'll leave that with you to think about. So that's the number of how many COP checks. So, what? So if you ask me, so what? So what if you're doing so many COP checks? It obviously also means that you are addressing the misdirected payments, which was actually the initial objective of COP. 

When COP was launched, it was aimed to address the fat finger issues, right? Instead of putting 1, 2, 3, 4, you put 1, 3, 2, 4, and then there you go. We all know about a payment going to a wrong account. The challenge of course being, how do you measure something that's not gone wrong, right? So, if it hasn't gone wrong, you cannot measure it. 

07:17 So the only way we have managed to put some figure is what we call as a credit payment recovery or CPR within the faster payments. And from the time it was launched to where we are today, we've seen nearly 59% reduction in the sent claim percentage, which is primarily on the account numbers. 

The other aspect was obviously the fraud, right? It was never intended to be a fraud tool when it was launched. But as soon as it was launched, it became very apparent that it is a great anti-fraud tool in conjunction with everything else that BSP will also do. 

07:55 And again, figures are difficult because frauds are probably three or four steps always ahead of us. You bring in something and they've already found a loophole and they've started doing something. So, for example, invoice scam, as we all know, is a big one. And that invoice scam, we've seen circa nearly 32% reductions from 2020 to 2024.

Then the investment scam, that's again around 30%. And then the most important, I would say, and you need to remember that 2020 was when we were all living in the world of COVID. And impersonation scam was very high, whether it was police or bank or your CEO or, you know, people saying, oh, you walked beyond the five-kilometre radius or you drove beyond the five kilometres. Whatever, that has definitely combined has reduced again around 30%. 

08:51 And again, I would like to call, we call it as an anti-fraud tool. But remember, fraud has already happened. Someone has actually convinced you much, much before that you should be paying this person. You've already been scammed. What COP is giving you is that literally the last mile, right? The last mile we talk about is before your money is getting out of your account. It's giving you that one last chance to correct you, so it's not that it's going to stop the fraud, but it's that realisation that...

09:25 Dave: It's a prevention technique.

09:27 Anu: It's a totally prevention detection because if it's gone, it's gone. Then it's only about reimbursement.

09:34 Dave: I guess some clear parallels here. So scams was a big thing. Clearly mismatched payments. It's great to see the impact it's had in the UK around that. And as you say, won't necessarily stop fraud, but a fraud prevention technique. And it's great to hear some of those kind of numbers. So, maybe you can just talk through what has been the business and consumer response to launching Confirmation of Payee?

09:55 Anu: I read about this research that was recently done. And one of the questions there was about COP, how aware are we of COP? And in that research, 97% of people interviewed knew about COP.

10:08 Dave: Wow. 

10:08 Tina: Wow.

10:09 Dave: That's high numbers. 

10:10 Tina: That's huge. 

10:11 Anu: Yeah. So again, that's a combination of both personal and businesses and corporates. When COP was initially designed, it was probably more focused on the personal for very obvious reasons, because you wanted to protect the end-users' hard-earned money, and then you wanted to provide, corporate's needs are slightly different than personal. Personal, you and me want to make a payment to our gardener, or you want to make your utility bill, you're changing providers, you're making to school, universities, tuition, anything that you need. 

Whereas corporates are probably looking more at other corporates, maybe, but also they are paying utility. So, utility services are paying consumers like you and me, and they want to make sure that there's no water bills, or whether it's your council tax. All these organizations are also looking at how do we make sure that the payment is actually going to the intended recipient.

11:09 Dave: Yeah, there's a great business benefit as well. So Tina, maybe just turning to you. To what extent have we in Australia learned from other markets like the UK in terms of the experience they've had with confirmation of payee?

11:22 Tina: Yeah, I think at one stage we had Anu probably on speed dial at one stage, it was like one Friday night that I was sitting in my office at home and the kids were in bed and I was whispering like, how did you do launch? But I think a lot of the learnings that we took from Anu in particular, I mean, obviously don't launch during the middle of a COVID outbreak, you know...

11:46 Dave: That'd be a good one. 

11:47 Tina: That's a good one. I think the other piece is around the API and making sure that it was a standardised API from the get-go, I think that was a key learning for us. I think the need for the standardised customer experience, I think that was a key learning. But I think as well, as Anu touched on, in regards to retail versus business, and I think we learned into that very heavily at the very beginning, right? 

And worked out very early on that, yes, the immediate need right now is for consumers and the retail side of things. That doesn't mean we should ignore the business side of things. And I think that was a key takeaway for us was that it needed to be thought about early on. 

12:31 The other thing that we learned from Anu really quickly as well was don't just peg yourselves into that Confirmation of Payee only. Think about Confirmation of Payer early on, which I think was a key learning for us.

12:45 Dave: So as we look ahead, probably a question for both of you, actually. Scams and fraud continue to, you know, be a challenge for us in the payments industry. And we have a protection layer like Confirmation of Payee. But what else could there be and other evolving things happening in payments that could offer consumer protection? I'm interested in your perspective on that.

13:05 Tina: So I think it comes down to the key piece being they need to keep investing in this. And as Anu pointed out before, scammers get smarter every time that there's a new thing that we bring out and we say, hey, this is a new way to protect consumers. The scammers are like, yeah, exactly. They're like, "Hold my beer, I've got this." Right?

So, I think that that's a key piece that we need to keep meeting them and trying to get ahead of that curve. I think as well, when it comes down to it, you need to also think about the valuable insights that each of these banks have and making sure that they have a platform to share these insights.

I think we've founded like a fraud advisory group, right? And so they have a meeting and they talk about the trends that they're seeing and they have a relationship with the law enforcements. And so those trends are coming into us and we're sending them back out. And I think that relationship, and I think early on, we're talking about relationships, I think having that going as a two-way conversation is really, really key.

14:06 Dave: Yeah, and Anu?

14:09 Anu: So there are a lot more use cases, if I could call it use cases, or scenarios where we can use the benefits of COP, just to name a few, I think I mentioned utility, government agencies would love to have that. Then you have the NBFIs, they're not necessarily peers, but your pension providers, your insurance companies, could there be things that can be done in a way much quicker for them and not dependent on their banks or the PSPs that they are assigned to, salary payouts, all these kind of use cases that you see, which could utilize COP. The other one is, could it go beyond payments?

Could we look at that? A couple of things that comes to mind is all about the Digital ID, right? We do talk about COP not being an ID because it doesn't check the identity of a person, it only confirms, but could it be combined with a few checks that's there that gives you another layer of assurance? So yeah, a lot more use cases where we can, because we've got the basic API now, it's about making it premium. What else could we do? And I'm sure there's a huge market. All with the industry collaboration, there's nothing that you and me can do in isolation. So it has to be with the industry.

15:30 Dave: Yeah, I mean, I think it's really interesting for us. I mean, obviously we're just launching, but I think about what other verification use cases could be used in the future and other problems it solves. I mean, that's quite interesting to see kind of how you're thinking about that. I guess on that sort of theme, last question for both of you. Do you think there's a case to look at interoperability? Obviously you've built... Confirmation of Payee in the UK, we've bought it in Australia, there's other markets it's in. What's your views? Maybe start with you, Anu.

16:02 Anu: You'll be very glad to know that my answer is 200% yes. It is definitely the future and I talk about it all the time. Interoperability, COP beyond UK as I call it, right? Why do I want to hold the benefits here within UK? Initially, we thought that it might be only appetite coming into UK, but we are seeing more and more even asking to go deliver it outside and which again makes sense. 

So, if I'm sending my daughter to Melbourne University or maybe I should say Sydney because you guys are Sydney. If I'm sending, then I want to make sure that I'm paying the tuition fees to the right. I don't want that big an amount being going into false hands.

16:48 Similarly, if you, Dave, you said your family is here and you as an expat you are working abroad, if you're trying to make payments, utility, you want to make bills, you want to make sure that you're actually paying to EDF and not EFD. It's all about how do we bring it all together to have that harmonised, standardised approach. You don't want to have too many differences.

17:12 Dave: I'm definitely the use case. I'm happy to be saying, you know, I want to use COP to be sending money to UK from Australia and vice versa. But Tina, maybe just closing with you, for us, obviously just starting the journey, but is international something we would be thinking about?

17:27 Tina: Yeah, look, it's already something that we've started to have those conversations with. We've spoken to New Zealand as well. We've spoken to Anu about this as well. And I think it's something that we actually are leaning into quite heavily. We see the use cases and we see the pressure from the banks as well to dive into this. 

I'll also be very clear and say that our COP service is definitely still, you know, crawling, we'll walk first and then we'll get to the running. But I think where Anu's at, like you're at the running stage, right? So, you're able to be a little bit further along in that conversation and that journey. And I think that's awesome, to be honest, because I really am watching that closely. 

18:05 Dave: Yeah. So we've started the journey, but we've got to keep an eye to what's happening in other countries.

18:10 Tina: Oh, a hundred percent. 

18:09 Dave: So, I just want to say, Tina and Anu, thank you very much for coming on the podcast today and sharing your perspectives. I appreciate it. 

18:18 Tina: Thank you.

18:18 Anu: Thank you so much, Dave. Thanks, Tina. 

18:21 Tina: Thanks, Anu.