Shearman & Sterling LLP | FinReg | UK Payment Services Regulator Announces Closure of Phase 1 Technical Environment for Confirmation of Payee Services
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  • UK Payment Services Regulator Announces Closure of Phase 1 Technical Environment for Confirmation of Payee Services

    02/10/2022
    The U.K. Payment Systems Regulator has announced a phase-out of the Phase 1 technical environment that enables certain U.K. payment services providers to provide confirmation of payee services. The PSR's Specific Direction 11, which comes into effect on February 11, 2022, requires existing Phase 1 CoP participants to operate within the Phase 2 technical environment from May 1, 2022. The Phase 1 technical environment will then permanently close on May 31, 2022. Phase 1 participants are expected to provide information, including their intended switchover date and a description of their progress towards achieving switchover, to Pay.UK, the body responsible for maintaining Phase 1 standards, on a monthly basis.

    CoP is a system which ensures that certain identifiers (including name, sort code and account number) of a payee are verified against the records of a payment services provider before a payment is made. It was developed to assist in the PSR's fight against "Authorised Push Payment" scams and accidental misdirected payments. The PSR introduced Phase 1 of CoP in August 2019 for the six largest banking groups (Lloyds Group, Barclays Group, HSBC Group, Royal Bank of Scotland Group, Santander Group and Nationwide Building Society). Several other PSPs subsequently voluntarily joined Phase 1.

    The Phase 2 technical environment for CoP has since been developed, which is designed to broaden coverage for the remaining PSPs and enhance payment security for consumers. Phase 2 currently runs alongside Phase 1. In December 2021, the PSR consulted on the process for winding down Phase 1, in order to ensure all PSPs transfer over to, and operate within, Phase 2. The PSR has now published its response to the consultation, which offers further information on the policy reasons behind the final version of Specific Direction 11.

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