OTS - PwC Strategy& study: IBAN-name checks can increase confidence in instant payments, but are not a universal solution (part 1)
2023. June 06. 13:43
Munich, 6 June, 2023 (APA/OTS) - Instant payments are becoming more
popular in Europe, but at the same time attract fraudsters - In
future, according to draft EU legislation, banks should therefore
check before every payment whether the IBAN and account-holder name
match - Banks and payment service providers take a nuanced view of
the proposal
IBAN-name checks can help to increase the attractiveness of
instant payments within the EU, notably by increasing trust in the
new mode of payment. But in order to effectively combat attempts at
fraud and to bring about greater acceptance of instant payments
Europe-wide, they need to be supplemented by further measures. Any
possible standardization should, at the same time, be open to
solutions already established in individual countries and aim at
efficient implementation. These are the findings from the study
"IBAN-name check: Current developments and concepts" co-authored by
Strategy&, PwC's global strategy consulting business, together with
Oesterreichische Nationalbank (Austrian National Bank, OeNB),
Deutsche Bundesbank, and the Euro Banking Association (EBA). For
the study, 17 representatives of European banks, public
institutions and IBAN-name check providers were interviewed.
IBAN-name checks just the first step
Instant payments are being used with increasing frequency
within the Eurozone. At the same time, this payment method can also
favor fraud. Accordingly, a legislative proposal from the European
Commission envisages the mandatory introduction of IBAN-name
checks, in order to counteract this and increase confidence in this
mode of payment. Before every instant payment, a background check
is performed as to whether the IBAN and account-holder name match.
Above all, this check should partly combat Authorized Push Payment
(APP) fraud, where fraudsters induce their victims to transfer
funds to what is ostensibly a known account, but which in reality
is one controlled by the fraudsters. According to the results of
the study, IBAN-name checks can make a significant contribution to
increasing confidence in instant transfers and ensuring a good user
experience. At the same time, almost all the experts interviewed
emphasize that IBAN-name checks alone cannot significantly drive
down instances of fraud.
"Since the bank fraudsters' methods are continually evolving,
IBAN-name checks can only be one strategic component in a series of
further measures developed by banks and payment service providers
themselves. Legislative initiatives like the move by the European
Commission should specify a framework for this, within which the
financial actors involved are able to drive forward and effectively
implement their initiatives," says Petia Niederländer, Director
Payments, Risk Monitoring and Financial Literacy at
Oesterreichische Nationalbank and co-author of the study. "Those
using the IBAN-name check as a strategic component can not only
increase trust in their own institution, but can also
simultaneously develop new business models via payment handling,
such as account-holder verification for online banking via
smartphone."
Many of the actors interviewed are also calling for the costs
for introducing the technology to remain manageable, for bulk
payments to be exempted from IBAN-name checks, for these checks to
be introduced as mandatory only for private customers, and for it
to be possible to continue using existing solutions for
corresponding checks. One major point of criticism is the
implementation period, which is considered to be too short given
that other provisions and Directives, such as on PSD3, need to be
realized within the same timeframe.
"Whilst not overestimating its importance, many financial
actors view the introduction of IBAN-name checks as a relevant
component for expansion of a Europe-wide system of instant
transfers that is supposed to be both user-friendly and secure,"
comments Andreas Pratz, partner at Strategy& Germany and co-author
of the study. "The experiences of the banks should be taken into
account in the planned regulation, and the continuing use of
established solutions for IBAN-name checks in individual countries
made possible, in order to shape implementation in other countries
efficiently. In addition, the challenge is to remain open to
further measures by the credit industry and thus to contribute
collectively to combating fraud." (continues)