This selection comes after a competitive process and will last for at least five years, the global provider of banking and securities services said in a Wednesday (Sept. 27) press release.
The agreement between J.P. Morgan and the U.S. Treasury Department highlights the importance of account validation in maintaining payment integrity and reducing improper payments, according to the release.
In the fiscal year 2022, the Fiscal Service disbursed around 1.4 billion payments for federal agencies, totaling $5.27 trillion, the release said. These payments included services such as Social Security and Medicare payments, unemployment insurance and tax refunds — all cases in which improper payments resulting from fraud or clerical errors can cause delays in delivering funds to rightful recipients, financial losses and a decline in public trust in government services.
During the same fiscal year, the federal government reported an estimated $247 billion in improper payments, per the release. This includes overpayments, underpayments and payments that should not have been made.
To address this issue, J.P. Morgan will now verify critical payment information for the federal government before payments are issued, according to the press release. The bank will use its technology, network of secure customer information and industry data to ensure the accuracy and validity of payment details.
Takis Georgakopoulos, J.P. Morgan’s global head of payments, said in the release: “This is a significant testament to our capabilities and it is particularly gratifying that this work will help to provide money to Americans faster, safer and more accurately while also saving taxpayer dollars.”
This is not the first collaboration between J.P. Morgan and the Treasury Department, according to the press release. The bank has previously advised the Treasury on digitizing payment systems and modernizing operations to enhance efficiency in transactions with citizens and businesses.
PYMNTS Intelligence has found that account validation is one of the most common services that financial institutions (FIs) provide for their corporate clients. Eighty-nine percent of FIs offer account validation, alleviating some of the major challenges faced by their clients, according to “Meeting the Challenge of Payments Modernization: Understanding Customer Needs,” a PYMNTS and FIS collaboration.
Strong authentication and bank account validation is important in an increasingly online world in which bad actors have more opportunities to commit fraud and more tools with which to do so, Candler Eve, vice president and director of enterprise fraud at MidFirst Bank, told PYMNTS in an interview posted in January.
“We see invoice fraud with some frequency,” Eve said. “I can tell you that across the country, it is rising.”