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21 September 2023

New Zealand bank customers missing out on basic banking protections

Consumer NZ wants banks to fast-track name and number matching to reduce the increasing number of New Zealanders being scammed through bank transactions. Name and number matching, also known as confirmation of payee (CoP), is a service that can be provided by banks to allow a person making a payment to check it is going to the right place.

It is estimated that scams cost New Zealanders more than $200 million a year. Consumer considers that figure is likely to be an underestimation because many scams go unreported.

“We are concerned that without urgent action by the banks and others, the number of scams and scam victims will continue to increase,” said Jon Duffy, Consumer chief executive.

CoP allows a person making a payment to check the details they have for a payee match the details held by the payee’s bank.

Implementation of CoP would have an immediate impact on scams, particularly authorised push payment (APP) scams.

An APP scam is when someone is tricked into sending money to a fraudster posing as a genuine payee.

CoP also helps to avoid accidental, misdirected payments to the wrong account holder.

“Basically, if the name you’re paying doesn’t match the name on the payee’s bank account, the bank can raise an alert or stop that payment being processed. It’s that simple.”

The effectiveness of CoP

Off the back of CoP being introduced, it has been reported the Netherlands saw an 81% decline in fraudulent domestic bank transfers.

In the UK, banks that adopted CoP in late 2020 saw a 10% reduction in APP fraud (in value terms) and a 35% decline in scam volume in the first year alone.

“Earlier this year CoP was introduced by parts of the sector in Australia. Despite New Zealand's major banks being Australian owned, New Zealand customers are missing out on these protections.”

What are banks in New Zealand doing?

Last week, the New Zealand Banking Association (NZBA) said it would “lead the way” on a national cross-sector approach to scams. The NZBA detailed a number of initiatives to combat scams and protect New Zealanders, including CoP adoption.

Consumer is concerned no timeframe has been given for the implementation of these initiatives.

“Banks have finally accepted that name and account matching is necessary to help prevent scams. It’s our view this functionality should have been implemented before now, and failure to do that means banks have not been adequately protecting their customers.

"We know that CoP functionality won’t prevent all types of scams and that scammers will always look for ways to get round preventative measures, but that doesn’t mean banks and other businesses shouldn’t be doing everything they can to prevent harm to their customers.

“We think until banks have introduced this technology, they should reimburse anyone who loses money if that loss could have been prevented by name and account number matching,” said Duffy.

“Scamming is a major concern for many New Zealanders, and the frequency and sophistication of these scams is alarming, as is the level of success some scammers are enjoying. It's imperative the banks play catch up, and quickly."