Governance, risk & compliance
Well, perhaps, but Furman should know as well as anyone how regularly humans cross that borderline. Though it may not have been specifically built for the purpose, the slow and stately banking system that predominated before digitisation minimised the impact of momentary irrationality. Rather than encouraging confusing workarounds, today’s systems need to be designed to do the same. Belmore’s likely thankful he has never had to deal with anything on the scale of Citibank’s blunder, but it is his job to help the UK’s banks – and, through them, the general public – avoid similar issues.
“Sometimes in our desire to make the world very effective and very efficient, we can lose sight that effective and efficient can also be dangerous,” he says, though he also emphasises how rarely that proves to be the case. “It’s not rife, but for those that it affects, it can be dramatic. It brings with it this aspect of, ‘Have we made it too easy, should there be more friction?’”
Applying the brakes
As the Citibank case shows, the friction associated with reversing erroneous transfers is considerably greater than the friction built into the system to prevent them happening in the first place. When it comes to money lost through bank errors, Belmore points out that, although every institution will have its own threshold for seeking costly legal redress, keeping ‘free money’ received in error is a crime and can be punished as such.
“Every once in a while, people will take a stand and go collecting even smaller amounts, because they’ve got to make sure that the principles are upheld,” he says. GDPR notwithstanding, anyone who loses money through erroneous payments can seek court orders to reveal where it ended up. When that happens, the recipients “will get a summons, they will get a chap at the door, and they will get accused of theft”.
As far as dealing with customer claims is concerned, the alignment
Pay.UK has instituted across the country’s payment industry, particularly over the past six or seven years, has made resolving issues even easier. Still, whereas it is relatively easy to demonstrate that a bank system error has occurred, people’s testimonies need to be thoroughly investigated. Senders claiming to have made an erroneous payment may themselves be trying to profit by recalling funds used in legitimate transactions.
Belmore imagines someone selling their car and finding on the bus home that the payment was instantly rescinded. “It’s very clear that if a payment has been sent, and a customer is claiming to have made an error, we need to validate it.” In doing so, banks must remain entirely neutral. It is not their place to arbitrate commercial disputes (over rent, for
Future Banking /
www.nsbanking.com
instance). They can only signpost the sender and beneficiary towards legal advice or representation. But while the respective frictions of sending and reversing can never be completely balanced – and not even the most risk-averse person or organisation would care to go to court just to be allowed to pay for their share of last night’s dinner – there is plenty of room to minimise mistakes without making banking inconvenient. For one,
Pay.UK’s recently introduced ‘confirmation of payee’ scheme, which had achieved 96% market coverage at the time of writing (and should soon reach 98%), inserts an extra screen showing the name associated with a recipient’s bank account into online payment processes. As well as restricting the basis for false claims, it is particularly useful for stopping phishing, where fraudsters present themselves to their targets using a different name from the one on their bank account.
Another approach is
Pay.UK’s new ‘request to pay’ system, which reverse-engineers the current paradigm by putting the communication channel before the payment rail rather than relying on it to resolve issues after the fact. In short, request to pay enables recipients to initiate transactions by sending a form that links directly to their verified bank account. It is still possible to send the request to the wrong person, but the chances anyone will unquestioningly agree to pay someone who has offered them nothing in return are tiny compared to the odds someone will hide or fight to keep ‘free money’. It is also an attractive alternative to direct debits for freelance or gig economy workers who do not receive regular salaries, as the platform gives users more flexibility about how and when they pay.
Belmore characterises both request to pay and confirmation of payee as ways of giving consumers more control and confidence, as well as protecting banks from difficult and potentially damaging situations. “There’s no silver bullet,” he says, “but the more of these layers we can put in place, the more we can give the consumer the choice and the capability to make their own decisions about what they want to do and when.” That just means sacrificing a little convenience.
“As an industry we’ve got a huge role to play to make this good and make this safe and increase confidence – but the consumer’s got to buy into the need to be protected at the same time as the need for effective, efficient payment systems,” Belmore adds. “Even in the industry we find ourselves cursing at laptops and iPads: ‘Why do I need to find my wallet and my phone?’ But we appreciate that it’s for the right reasons.” The moment a large payment disappears, those minutes saved not walking to the bank – not to mention the seconds that would have been spent on extra online verification measures – no longer seem to matter quite so much. ●
25 £19bn
Value of total payments
Pay.UK
enables every day.
Pay.UK
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