Digital fraud in the U.K. is increasing at an alarming rate.
A recent report by UK Finance showed that authorized push payment (APP) fraud losses increased by 71% in the first half of 2021, pushing for an extra layer of security to ensure that payments are sent to their intended recipients.
To combat this APP fraud epidemic in the U.K., the Confirmation of Payee (CoP) scheme has emerged as an industry-wide response to reducing the ways that scammers can lure people into sending authorized payments into criminal accounts.
Read more: No Phishing: Multilayered Defense Best Way to Keep Fraudsters Empty-Handed
In an interview with PYMNTS, Charles McManus, CEO of ClearBank, acknowledged the severity of the situation given “the significant levels of fraud” seen in the industry.
He said the technology-enabled clearing bank is helping partners like Nationwide, Tide, OakNorth and DWP to offer real-time payment and innovative banking services to their customers, while the company’s CoP offering has made a “massive difference” in reducing fraud, particularly in the small and medium-sized business (SMB) space.
Last month, the bank announced a partnership with Recognise Bank, the U.K.’s newest SMB bank. ClearBank has now become Recognise’s clearing bank, providing services including CoP for Recognise’s newly launched savings account offering.
But while CoP is helping to curb fraud, McManus said the main challenge is the process by which a bank is introduced to CoP — particularly the requirement for each member bank to approve another for onboarding to take effect. There’s also a heavy cost of business associated with it, but McManus noted that “we’re determined to combine with other FinTech players to reduce that cost in the bank-to-bank payment space.”
Serving SMBs With Cross-Border Payments
The U.K.’s split from the European Union has no doubt created a complex environment for cross-border businesses involved in financial services, including the loss of passporting rights to operate in all the European countries.
“We are constrained really hard in servicing our domestic Sterling customers in relation to what they need and in relation to digital infrastructure payment services,” McManus noted, adding that as checks and cash have gone down, card payments and open banking payments are going up, making it imperative to deliver those services to customers.
Interview with Verto CEO: From Currency Convertibility to Cross-Border Payments in Emerging Markets
That’s why ClearBank has partnered with VertoFX, a B2B payments platform and currency exchange marketplace for SMBs, to enable U.K. and European businesses to seamlessly move money across borders and offer clients a multi-currency FX and international payment solution that includes faster payments capabilities and instant local settlements.
See also: The B2B Marketplace Fix for FX in Emerging Markets
“[It’s] using API and real-time technology that essentially gives our customers the flexibility of providing those FX rates on international payments per trade, and gives them optionality in pricing, flexibility and also real-time settlement flexibility of when they do that on a payment-by-payment basis,” McManus explained.
Profitability Before Europe Expansion
According to McManus, historically most banking groups have built their international expansion plans on a form of domestic strength, which is why the firm is aiming for profitability in the U.K. next year, after which Europe will be the next priority.
“Profitability is key, and from our perspective, we’re running a very disciplined, sustainable business rather than just going for top-line growth and incurring significant losses,” he explained, adding that the focus is on first building a very robust business in the U.K. before looking to expand further.
Once that time comes, the goal will be to provide seamless cross-border services not just to customers in the U.K., but also to overseas banks in need of international and FX capabilities to operate freely in the region.
“I see the U.S. dollar-Euro-Sterling corridor as being critical to servicing our customers and their customers in those jurisdictions,” McManus said.
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