IBAN-Name Check: Lessons Learned from the UK and the Netherlands
Because of the increasing pressure from consumer organisations and politics, we decided to dedicate a session to this topic. We partnered with SurePay, the Dutch IBAN-Name Check inventor and provider.
Their CEO and co-founder, David-Jan Janse joined us as one of the special guests. We also invited Gijs Boudewijn, General Manager of the Dutch payments association to share their experience. Where the Belgian banking industry is currently navigating in the right direction with the IBAN-Name Check, the Netherlands has had the solution live for years now.
How does IBAN-Name Check work?
A study in the Netherlands revealed that 22% of consumers were convinced that banks check the name and account of the beneficiary, and another 60% assumed they would. The IBAN-Name Check provides an answer to this urban legend.
The idea is that banks that integrate the solution in their app, offer consumers a check to make sure they send the money to the correct beneficiary by checking whether the name matches the IBAN account. This solution is implemented as IBAN-Name Check in the Netherlands and Confirmation of Payee in the UK.
If there is a match, the consumer gets approval; in case of a no-match, the customer is told that the IBAN and the beneficiary name don’t match. There is no liability shift to the bank involved in the Netherlands: it remains the customer's responsibility to proceed or stop the payment.
In case of a close match, this is also made clear with a suggestion close to the correct name, of course, all in line with GDPR.
Initially the main goal of the IBAN-Name Check was not fraud prevention. It was set up to make sure the account was not used 3-4 years ago by someone else, this solution is now an effective fraud prevention tool in the Netherlands, the UK, and more countries across Europe.
Gijs: “Typically, when accounts were closed, the banks would wait three, four years, and then the bank would reissue those account numbers. As a customer, you could lose large sums of money because the account was reissued to somebody else.”
SurePay started as a spinoff of Rabobank, first to tackle invoice fraud (where the beneficiary account number is changed on an invoice so that people pay the wrong account number). The founders quickly realised the exponential added-value by connecting multiple banks.
Quickly more banks agreed to collectively connect, as they realised this is not in the competitive space of banks. On top of that, it resolved the problem of societal expectations from consumers and politics on more controls on the account number and beneficiary names, and the issue of reopened account numbers after the limited period of 3-4 years.
David-Jan: “We send out a no-match warning 100,000 times a day. 100,000 times a day, and of course still fraud will exist, but we mitigate much fraud by and errors by this warning.”
In fraud cases where the concern is whether the payee is the right one, SurePay eliminated 81% of fraud cases, a number that grows with the trust the people have in the solution.
More than fraud prevention
In the example of the customer that pays to a reissued account, the IBAN-Name Check now became a cleaning tool for bank customers. David-Jan: “We mitigate misdirected payments with 67%. We see that most of the misdirected payments arise because the address book was outdated”.
With the IBAN-Name Check, people would avoid bounced transactions with possible financial consequences for this person. Once the customer received the message that the account belonged to someone else, they also knew they needed to update the account information.
SurePay warns 3 million times a year that an account is closed. To provide more service, they added the ‘Overstap Check’, a control to see whether the beneficiary switched banks or not.
David-Jan: “When you have the right name and the right (former) IBAN, we disclose that the person or company has a new account number, so you can directly pay to that new number, that way eliminating much friction in payments.”
Another popular gimmick that users like is the close match, allowing people to correct almost correct names. Take the example of “Coeckelbergs” being suggested in your bank app if you thought my family name was Koekelberghs (although this example may make more sense for a Dutch-speaking audience 😉).
Creative innovation to grow the effectiveness of IBAN-Name Check
What the IBAN-Name Check cannot always prevent, for example, are the authorised push payments (“Kluisrekeningfraude”), as Gijs explained: “By the time the consumer the payer pushes the send button, having been manipulated by the fraudsters for sometimes an hour or two, being totally pressured and panicked, that the life savings are being transferred if they don't send their money to the so-called safe account they will get a red flag, but sometimes ignore it in all their stress.”
Because these kinds of fraud often go hand in hand with an increase in daily limits of transaction values, some banks built a delay in raising those limits. Even this doesn’t prevent scammers from emptying accounts.
Of course, once someone loses control over their account, the IBAN-Name Check doesn’t work anymore since the fraudster will always overrule the no-match. Innovative banks started linking the IBAN-Name Checks in transaction monitoring to answer those threats.
David-Jan: “When somebody pays multiple times 10,000 euros, with the no-match warning, then a transaction monitoring can trigger this. Maybe it's from an older IP address, maybe it's from an older device. In that respect, the IBAN Name Check no-matches also operate as a vital extra flag also for transaction monitoring.”
As fraudsters become smarter, they know which banks are not connected to SurePay, leading to a concentration of fraud on their accounts. No banks now even join the network to actively monitor and screen for incoming payments without adding the features in their front-end to avoid money mules among their customers.
The UK vs the Netherlands
Unlike in the Netherlands, UK banks waited for a mandate before taking action. The consequences didn’t play in favour of the industry. Next to introducing a reimbursement scheme, the mandate to implement a control mechanism was limited to the major banks.
Because the mandate came with a liability shift to the banks in case of a match message when there is no match, the industry is much stricter in setting the rules, leading to many more blocked payments. Because of its inaccuracy, more people reject the message, with all risks that this entails.
In the Netherlands, banks initiated the service. The proactivity came with more positive vibes and higher trust in the service from the beginning. It gave the sector more freedom in setup because of less interference by all kinds of stakeholders in setting up the solution and led to positive spin off in the press and from politicians.
Although from a first conversation, it seems banks should not wait for regulation to jump in, the main concern why IBAN-Name Check didn’t happen yet in Belgium, according to our audience, is the lack of regulatory and liability framework.
With the IBAN-Name Check used for onboarding, request to pay, control of batch payments for corporates, developing and connecting multiple IBAN-Name Check Solutions internationally, SurePay doesn’t sit still.
I am curious to see how these developments influence how the Belgian market responds to the call for this kind of solution to serve their customers better.