Why do faster payments have no protection and do banks ever compensate when they go wrong?

deadendwaterfall

I'm sure this will have been discussed countless times in the past, but why is it if faster payments go wrong in that you accidentally send it to the wrong account by typing one number incorrectly for example, or there's a rare glitch where even when you have typed in the correct details, the money never reaches the account, doesn't get returned to you and disappears into a black hole, it's basically a case of tough luck? Have any of the banks ever been known to compensate the sender in such cases when the money cannot be recovered as a token of 'goodwill gesture'? 

eskbanker

The misdirected payments process was introduced to address that first issue about five or six years ago - it's a more structured way of addressing the issue than the ad hoc approach before its implementation but it is generally reliant on cooperation by the recipient.  It seems ambitious (and inappropriate) to expect banks to pick up the tab for mistakes made by their customers, but the Confirmation of Payee initiative should have significantly reduced such occurrences.

I don't recall hearing about your other example of faster payments not reaching the (correctly specified) target account, but that would seem to be more within the banks' control so if you can demonstrate that this has happened then you should have a stronger case for reimbursement....

masonic

Maybe you could rephrase that. You've mentioned two scenarios:

1) You type in the details incorrectly: for this there have been measures introduced to help, such as Confirmation of Payee and the ability of the receiving bank to transfer the money back if the recipient does not dispute the error. However, at the end of the day it is the customer's mistake, and if the bank cannot recover the funds they would not normally need to reimburse the customer.

2) You type the details correctly, but the money disappears without a trace: I've never heard of this happening, but it would be the responsibility of the bank to reimburse the customer if they incorrectly routed a transfer, assuming there were no fraud or money laundering related reasons why the bank could not legally complete the transfer.

lisyloo

If I need to pay large amounts then I often send a small amount first.
once I’ve confirmed receipt then I’m happy to send larger amounts with the sent details that already worked.
this might stem from my IT job where we test things before doing it for real

General_Grant

I too like to send test payments but this is not always possible - for example when opening a new savings account which has a minimum amount for the first payment/operating balance or only one payment is allowed in order to open a fixed term bond for a few thousand pounds.

SebH

What’s needed, really, is for the Confirmation of Payee system to become mandatory. If all banks participated then the chance of errors would be greatly reduced. As it is, CoP often doesn’t apply to smaller institutions so the risk of mistyped details remains.

I do accept that many smaller institutions argue they can’t afford to implement the system though.

masonic

SebH said:

What’s needed, really, is for the Confirmation of Payee system to become mandatory. If all banks participated then the chance of errors would be greatly reduced. As it is, CoP often doesn’t apply to smaller institutions so the risk of mistyped details remains.

I do accept that many smaller institutions argue they can’t afford to implement the system though.

It may also require a large infrastructure change. Not all savings providers can issue customers with an individual sort code and account number for each account. That would be a prerequisite of CoP. An easier alternative some providers use is to support debit card payments, or more recently use Open Banking to set up the payee on your behalf. Everything comes at a cost, which will ultimately be bourne by the consumer in slightly lower rates.

colsten

SebH said:

What’s needed, really, is for the Confirmation of Payee system to become mandatory. If all banks participated then the chance of errors would be greatly reduced. As it is, CoP often doesn’t apply to smaller institutions so the risk of mistyped details remains.

I do accept that many smaller institutions argue they can’t afford to implement the system though.

I would be many, many moons before each and every financial institution could participate. The costs involved could be prohibitive for some smaller providers, and stand in absolutely no relation to the cost of recovering accidentally misdirected payments, and/or the amount of fraud happening if there is no confirmation of payee name. Thus I don't see it becoming mandatory for all in a very long time, if ever. It's way more likely that all of them would invest in Open Banking and Pull-methods (as opposed to Push-methods) for deposits.

colsten

deadendwaterfall said:

I'm sure this will have been discussed countless times in the past, but why is it if faster payments go wrong in that you accidentally send it to the wrong account by typing one number incorrectly for example, or there's a rare glitch where even when you have typed in the correct details, the money never reaches the account, doesn't get returned to you and disappears into a black hole, it's basically a case of tough luck? Have any of the banks ever been known to compensate the sender in such cases when the money cannot be recovered as a token of 'goodwill gesture'? 

Given we now have COP, how big a problem is this?

1. How many people are misdirecting payments?
2. How many of these are doing this on the behest of fraudsters?
3. How many people are losing money due to misdirected payments?
4. How much money are people losing due to misdirected payments?
5. How much does it cost financial institutions to process/revert/reimburse misdirected payments?