Confirmation of Payee - A new way to reduce mistakes and fraud

Written by RightWay | 20 November 2024

Have you ever mistakenly entered the wrong bank account number when making a payment? It happens more often than you might think. Whether it's settling a supplier's invoice, paying a contractor, or making a personal Trade Me purchase, entering the wrong details can lead to a frustrating process to recover the funds.

These mistakes not only waste time but can also impact relationships with customers or suppliers.

Recognising the need to address this long-standing issue, banks in New Zealand have introduced a significant upgrade to payment systems: Confirmation of Payee.

What is Confirmation of Payee?

As of November 2024, New Zealand banks have started rolling out Confirmation of Payee, a feature designed to enhance security and reduce payment errors. This functionality allows payers to verify that the account name they enter matches the account number before completing a transaction.

Here’s how it works:

When you enter the account name and number for a payment, the system checks the information against the account holder’s details
If the name and number don’t match, you’ll receive a notification prompting you to review the payment details before proceeding
If the information matches, you’ll be able to complete the payment with confidence.
This additional layer of verification aims to reduce the frequency of payments sent to incorrect accounts, whether due to human error or outdated account details

Why is this important for businesses?

For businesses, accuracy in financial transactions is crucial — not just for maintaining smooth operations but also for building trust with customers and suppliers. With Confirmation of Payee, you have greater assurance that payments will reach the intended recipient.

However, as a business owner, there are steps you should take to make the most of this new feature:

Clearly state payment details: Make sure your invoices and terms of engagement clearly display your account name and number. If your business operates under a trading name that differs from your bank account name, make sure customers are aware of your bank account name
Communicate with your customers: Let your customers know about the importance of entering the correct account name and number when making payments. This will help reduce errors and ensure that payments are processed smoothly

One of the benefits of Confirmation of Payee is that it’s designed for first-time payers. Once a payment is successfully made, the system won’t typically prompt for confirmation again, provided the details remain unchanged. This helps streamline transactions for regular customers while maintaining security for new ones.

When will Confirmation of Payee be fully available?

The rollout of Confirmation of Payee is already underway across New Zealand banks, but the timeline for full implementation may vary between institutions. To find out when this feature will be available to you:

Check your bank’s website or contact their customer service team for updates
Keep an eye on announcements about any changes to the online banking experience.
Whether you’re receiving payments from customers or making payments to suppliers, this new feature will likely become an integral part of your banking process in the months ahead

Beyond mistakes - combating fraud

While Confirmation of Payee is designed to reduce simple errors, it also plays a critical role in preventing fraud. Scammers often impersonate legitimate businesses or suppliers, providing false account details to trick payers into sending money to fraudulent accounts.

With Confirmation of Payee, the system can flag discrepancies between the account name and number, alerting payers to potential fraud before money is sent.

That said, it’s important to remain vigilant. Fraudsters are continually evolving their methods, often combining phone, email, and even postal scams to target businesses.

Some of the more sophisticated scams now use AI-generated voices to mimic familiar individuals, making fraudulent requests appear more credible.

How to protect your business from fraud

Verify all requests: If you receive an unusual request for payment, especially via email or phone, verify it directly with the supplier or requester through a trusted communication channel
Beware of links: Avoid clicking on links in unsolicited emails or messages. These could lead to phishing sites designed to steal your credentials
Educate your team: Ensure your staff are aware of common scams and know how to handle suspicious requests

If something doesn’t feel right, don’t proceed. Contact your bank directly or reach out to the supplier using a verified phone number or email address. By being cautious, you can help protect your business from falling victim to scams.

How does this benefit the wider economy?

Reducing payment errors and fraud not only saves time and stress for businesses but also strengthens trust in the banking system.

Mistaken payments can cause significant disruptions for small businesses, where cash flow is often tight. Similarly, scams can devastate individuals and companies, leading to financial losses and eroding confidence in online transactions.

By introducing features like Confirmation of Payee, banks are creating a safer and more reliable environment for payments. This, in turn, supports the growth of businesses and the broader economy.

Need help managing accounts payable? RightWay can help!

At RightWay, we understand the complexities of managing your accounts while keeping up with the demands of running a business. Whether it’s ensuring your invoices are accurate and professional or streamlining your accounts payable processes, our team is here to provide expert support tailored to your needs.

Perhaps you’re transitioning to a new bank, if so, we can make the process seamless by updating your invoice templates in Xero with your new account number. We’ll also guide you on the best practices for notifying clients of the change and recommend keeping your old account open for at least three months to avoid disruptions.

In addition, our comprehensive Business Health Checks can uncover inefficiencies in your processes, offering actionable solutions to free up time and resources. With our help, you can focus on growing your business while we take care of the financial details.

Contact RightWay today to learn how we can streamline your financial management and set your business up for success.