The Royal Bank of Scotland (RBS) is the first to use a system for debit card payments which automatically verifies details such as the addresses of both parties and checks whether the payments follow a usual pattern. The project aims to cut fraud and mistakes which cost businesses billions of pounds a year.
Jane Barber, head of product development at RBS, said the bank is looking across its entire business to decide where to deploy the system. "Because we are a big business with a lot of core services, it is intellectually challenging to decide where to put it."
RBS plans to use the Banking Wizard Absolute service from Experian Payments, formerly Eiger Systems. The system uses information from Experian's information business to check the authenticity of bank accounts and to verify that the person making a debit payment is who they say they are.
The project aims to cut the costs associated with payment failures. "Business customers want to process payments quickly and easily but everytime something goes wrong it makes it difficult," said Barber.
According to the UK trade association for payments, Apacs, 2% of direct debits and direct credits, equivalent to 111 million transactions, fail each year. The cost of resolving failed debit payments is estimated to be as much as £35 per transaction or £3bn annually, according to research from Experian.
Traditional payment systems used by banks automatically check the bank account numbers and sort codes against databases to verify they are genuine numbers. But they do not verify the details of the individual making the payment - such as address and details of previous payment - which could make errors and fraud less likely.
"This is typical across the banking sector," said Gareth Lodge, analyst at TowerGroup. "As far as I know, no UK bank has a system that can do this because none has existed before."
Lodge said installing the software across the business will give RBS a single view which will help it spot frauds. "For example if somebody tries to commit fraud at its insurance division, transactions will be automatically blocked at its other divisions."
The Experian system is web-based and has a single interface so the bank will only have to implement the software once. RBS will pay for the service on a transactional basis with Experian Payments receiving a payment whenever a transaction is made.
Barber said the arrival of the single European payments area in January and the Faster Payments System next month means payment security is vital as payments systems will be increasingly targeted by fraudsters.