When will banks act with to stop account transfer mistakes?

The number of people losing money due to errors or fraud when sending funds online from their bank accounts continues to rise. Whilst the banks have done little to offer any kind of safety net, Quick Loans investigates what can be done.

If you have ever sent money from your online bank account to a friend or a new person for the first time, you might have checked and double-checked the account numbers repeatedly before pressing "send." Nervous that once you send it, there is no going back—the money is gone—even if you contact the bank within seconds to try to correct your error.

Currently, if you send money to someone and make an error by getting just one digit wrong in their account number or sort code, the other person’s bank will still accept the money—even if the account name you provided does not match the account receiving it.

Unfortunately, this has led to significant mistakes. There are numerous horror stories online of people who have mistakenly sent deposits for their new house to the wrong account. In many cases, this means a lucky member of the public has received an early Christmas present.

The only way the sender can retrieve their money is to go to court and file a money claim. The issue here is that the receiving person’s bank will not provide details of the recipient, meaning the sender has no idea who to file a claim against. It’s a complicated mess.

Some people have tried to make claims against the banks, but so far, the banks have successfully defended their positions. Their argument is that they simply carried out the customer’s instructions and sent the money to the account specified.

We are calling for an additional line of defence: the account name must match the account number. If there is a mismatch, the receiving bank should return the money. After all, Mr Smith cannot cash a cheque made out to Mr Roberts.

Why should it be any different for online payments?

If banks implemented a system to match account numbers with account names, the risk of fraud would also be significantly reduced. For example, there have been several high-profile cases where emails were sent between organisations requesting payment for legitimate invoices. However, someone in the sender's organisation—often an insider—altered the invoice to include their own bank details, allowing them to divert the funds.

This type of fraud is incredibly difficult, if not impossible, for the sender to detect.

Banks are looking to introduce a safety system to ensure account numbers match names. However, progress has been slow, and something initially scheduled for 2014 is now not expected to be implemented until at least 2018.

Have you made an online payment mistake? If so, we’d like to hear your story and share it to help others!