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The New Zealand banking industry is working together to launch a new Confirmation of Payee service.

The new service enables you to check if account names and account numbers match before making a payment.

What is the Confirmation of Payee service?

The Confirmation of Payee service acts as a safeguard, ensuring that the payee’s name matches the account name before processing payments. This will greatly reduce the risk of accidentally sending money to the wrong person and will help curb scams that prey on these errors.

Essentially, it acts as an additional layer of verification, making digital payments safer and more reliable for Kiwis.

By verifying account names against account numbers, the service promises to improve financial security for both individuals and businesses.

Who does it affect?

The rollout of the Confirmation of Payee service impacts everyone who uses online or mobile banking in New Zealand, from personal account holders to businesses and sole traders. If you’re someone who frequently sets up new payments or makes one-off transactions, this service will become a part of your routine financial activities.

For businesses, especially those with different trading and account names, it’s essential to be transparent with customers about the correct account details to ensure smooth transactions. Sole traders and companies must communicate these details clearly, as any mismatch could result in failed payments.

What types of payments are affected?

From the end of November 2024, the Confirmation of Payee checks will apply to payments conducted through personal online and mobile banking apps for NZ-based accounts. This includes setting up new payees, making one-off payments, and editing existing payee details.

While the service will initially roll out for personal accounts, plans are in place to expand to business accounts over time. It’s a phased process, so stay tuned for updates from your bank on when these changes will apply to your specific accounts.

How does the Confirmation of Payee work?

The Confirmation of Payee service employs secure software that cross-references the account name and number entered by the payer against the records held by the recipient’s bank. This verification process ensures that the details match before any money is transferred. All information used in this process is fully encrypted, complying with the Privacy Act 2020, and is not stored post-verification.

TIP: To receive payments smoothly, ensure that customers have your correct account name and number. This simple step can prevent transaction hiccups, especially for businesses that might use a trading name different from their registered account name.

How and when will it roll out?

Beginning in late November 2024, New Zealand banks started introducing the Confirmation of Payee service in phases. Each bank will have its timeline and stages for implementing the service, so you might notice it on your online banking platform before it appears on your mobile app—or vice versa.

Banks will communicate with customers as the new functionality becomes available, so keep an eye on your bank’s updates to stay informed. Eventually, the service will be available across all personal and business banking platforms nationwide.

Why the shift to Confirmation of Payee?

The introduction of Confirmation of Payee comes in response to growing concerns over payment errors and digital scams. With online transactions becoming the norm, ensuring the accuracy of payments is more important than ever. This service aims to provide reassurance and protection for all bank customers by verifying that payments are heading to their intended recipients.

Scammers often exploit discrepancies in payment details, so this new verification process will act as a deterrent. By reducing the risk of mistakes and fraudulent activities, CoP enhances the overall trust in financial transactions.

Ensuring smooth transactions

Businesses should take proactive steps to ensure a seamless transition to the Confirmation of Payee system. Start by reviewing your payment processes and verifying that your account names and numbers are correctly listed on invoices and payment portals. For companies with differing trading and account names, clear communication with customers is vital to prevent payment errors.

Additionally, consider offering multiple payment methods to accommodate customers’ preferences and make transactions as easy as possible, whether through credit/debit cards, direct debit, or buy now, pay later options.

Potential challenges for businesses

Despite its benefits, the Confirmation of Payee service may present challenges, particularly for businesses. If a customer’s bank details don’t match exactly, payments could be delayed, affecting cash flow. To mitigate this, consider becoming a registered bill payee, allowing customers to search for and verify your details easily. Talk to your bank about setting this up.

Business owners should also educate themselves and their teams about this to ensure everyone understands the changes and can assist customers effectively.

The importance of staying alert

During the Confirmation of Payee rollout, customers should remain vigilant against potential scams. Fraudsters may attempt to exploit the transition period by posing as bank representatives. Always verify the source of any communication claiming to be from your bank, and never share personal information unless you’re certain of the recipient’s authenticity.

Banks will communicate legitimate updates through official channels, so stay informed and trust your instincts when dealing with unfamiliar requests.

Conclusion

The Confirmation of Payee service is set to transform the way New Zealanders conduct financial transactions, adding an essential layer of security and accuracy. By understanding how it works and preparing for its rollout, you can ensure a smooth transition and continued financial safety.

To stay informed keep an eye on updates from your bank, and don’t hesitate to reach out for assistance if needed.