The convenience of making a bank transfer is one of their most popular features. Sending money at the touch of a button does away with the need of mountains of paperwork, as well as speeding up the process.
However, with such ease comes extra vigilance as the number of electronic bank transfers being carried out every day soars. This has led to a rise in the incidents of fraudulent behaviour, although banking providers and financial institutions have invested millions in combating fraud.
This is means that, on the whole, bank transfers are a safe way to send money, but you should also exercise caution when using them. Luckily, many forms of bank transfer have rigid security features built into them to combat fraud and avoid mistaken payments.
Although the Faster Payments System (FPS) allows for almost instantaneous transfers, there is a complex security procedure built into every transaction. If you are making the payment, your banking provider will first verify your identity before allowing you authorise the transfer.
You will then have to fill in the details of the account you are sending the money to. Once your bank is satisfied with this, they will release the funds to the FPS. They will then make sure that the details you have entered match the account you are sending the money to. They will check the account number, sort code and name on the account. If some of these components don’t match up, they will hold the funds and perform additional checks.
If FPS is happy that all the details are correct and the transfer has been authorised, they will release the funds to the payee and you will be notified when the payment has been made.
Confirmation of Payee
Earlier this year, a new measure introduced by a number of UK banking providers has sought to add an extra level of security to bank transfers. Confirmation of payee is a way of your bank making sure you are paying money into the right account. Previously, there was no obligation on banks to ask for the name on a particular account, just the sort code and account number.
However, depending on your bank, you will now be asked to supply the exact name of the account holder before proceeding with the payment. If you provide it, the transfer will be authorised, as long as it matches the account and sort code.
If you supply a name which is similar to the account holders, but not quite accurate, your bank will ask you to check the exact name and spelling before proceeding. Your bank may give you a suggestion as to what the name might be.
If you cannot supply the correct name, your banking provider may contact the payee to notify them that you are attempting a payment but that they cannot authorise it yet. The payee will be advised to contact you with the additional information you require to complete the transaction.
Confirmation of payee will be applied to bank transfers such as Faster Payments and CHAPS while there are plans to introduce it for BACS payments in the future.