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25 May 2020

The hidden cost of coronavirus: vital fraud protection on hold

Millions more pounds could be lost to scams

Important anti-fraud measures to protect you when you make online payments or use your contactless card in stores have been put on hold due to coronavirus (COVID-19).

The name-checking service, Confirmation of Payee (CoP), which warns you when a payee's name doesn't match the account number provided, was originally expected in June 2019, then pushed back to 31 March this year.

Now the six largest banking groups - Barclays, Lloyds Banking Group, Royal Bank of Scotland Group, Santander, HSBC Group (excluding M&S Bank) and Nationwide Building Society - will have until 30 June to introduce this important consumer protection.

New security checks known as strong customer authentication (SCA) have also been delayed. These checks should help combat unauthorised card fraud, which cost victims almost £621m in 2019, while losses to bank transfer fraud - which CoP will help tackle - totalled £456m.

Which? believes it's vital that consumers don't bear the cost of these delays.

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No protection for online bank transfers

At present, banks process online transfers using the account details only and take no notice of the name you enter. Once CoP is in place, banks will check the full name of the registered account holder with the recipient's bank.

There are four possible outcomes:

  1. Yes, exact match - the details match and you can proceed with the payment.
  2. Partial or close match - some of the details are incorrect so look for spelling mistakes or typos.
  3. No match - the details don't match so cancel the payment until you've made further checks.
  4. No name check - it has not been possible to check the name eg because the receiving bank doesn't offer CoP.

CoP has a vital role to play in reducing the money lost to accidental payments and bank transfer fraud, where victims are tricked into sending money direct to a fraudster's account. Lloyds, which has already implemented CoP, has reported a 31% drop in bank transfer fraud losses among customers who had used it.

RBS and NatWest have also introduced the checks. Yet other banks are lagging behind. In early May we asked volunteers to make an online transfer using a name that didn't match the account details.

We found that most of the banks required to introduce CoP did not display the warnings (Barclays, First Direct, Nationwide and Santander). First Direct has said it will introduce CoP checks by June. In the case of HSBC, CoP was in place for online banking but not mobile banking.

Smaller banks such as Metro Bank and Virgin Money aren't required to introduce CoP at all, though some (Starling, TSB, M&S Bank) have signed up voluntarily - see our table below for details.

Find out more:what is Confirmation of Payee and how does it protect you?

Online authentication delays

Strong customer authentication (SCA) is another important rule change that has been pushed back even further - from an original deadline of September 2019 to September 2021.

SCA rules require banks and card providers to make extra checks when you use your card. This could involve asking for a one-time passcode sent to your phone to prove it is you using your card details to shop online.

Banks should also make SCA checks when you use online banking, and ask you to enter your Pin when you use your contactless card to make cumulative transactions exceeding u20ac150 (£130), or five contactless transactions in a row.

The Financial Conduct Authority (FCA) had already pushed back the deadline for SCA to March 2021. Now the regulator is giving the industry an additional six months (until 14 September 2021) to implement SCA for online shopping transactions.

The FCA is also 'very unlikely' to take enforcement action if banks don't apply SCA to contactless card payments while the industry copes with the pressure of coronavirus.

And, where banks haven't introduced SCA for online banking login, further measures will be considered on a case-by-case basis.

Find out more:strong customer authentication - what will my bank require?

Fraud victims shouldn't pay for delays

The FCA expects firms to monitor fraud rates and take swift action if they see these rates rising or new patterns of fraud. If your contactless card is stolen and used to make unauthorised payments, your bank is legally required to refund you in full.

If you fall victim to bank transfer fraud, and would have been protected by CoP if not for the delay, you should be reimbursed.

Find out more:how to complain about unauthorised transactions on your card

Other regulatory delays caused by coronarvirus

To support the financial industry during the pandemic, the FCA has delayed several reports and pushed back deadlines for various consultations:

An end to unfair pricing for loyal insurance customers

The FCA was expected to publish a final report into the car and home insurance 'loyalty penalty' by the first quarter of 2020 but this has been pushed to beyond the second quarter of 2020 (date to be confirmed).

This report found that loyal customers pay through the nose compared with those who switch or haggle. Which? found in 2018 that existing customers paid an average of 20% more than new customers, while customers who had been with the same insurer for 15 to 20 years were paying as much as 75% more than switchers.

Single interest rate for easy-access savings

After finding that longstanding customers earn much poorer rates on savings than new customers, the regulator has proposed a single easy access rate (SEAR) that would ban firms from paying different interest rates to different customers based on the age of their account.

The consultation period has been extended from 9 April to 1 October 2020.

More support for retirees who don't take financial advice

Measures to help pension savers engage with their retirement pots when they take advantage of the pension freedoms have been delayed by six months.

Pension firms will be asked to offer a range of suitable solutions to savers who don't pay for financial advice. The FCA has also said that pension investments should not be defaulted into cash unless the customer actively chooses this option. And customers must be sent 'wake up packs' as they approach retirement.

Which? broadly supports plans for new 'investment pathways' though we have raised some concerns about how they should be implemented.

These rules will now be in place by 1 February 2021 (originally due August 2020).

Travel insurance signposting for customers with medical conditions

No new date has been confirmed for a signposting service designed to help people with pre-existing medical conditions find a fairer price for travel insurance.

The deadline of November 2020 has been pushed back to allow the travel insurance industry to focus on supporting their customers during coronavirus.

Which? has a dedicated guide to buying travel insurance if you've ever been diagnosed with cancer after discovering that those affected routinely face punitive premiums and tricky clauses.

Find out more:the travel insurance lottery - is your pre-existing medical condition covered?

First featured in June's Which? Money magazine

Also in this issue: we meet the fraud fighters, how to use chargeback to recover travel and other costs and our analysis of the best and worst investment platforms.

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