U.K.'s Nationwide invests in service to combat rising invoice fraud
The U.K.’s Nationwide Building Society has invested in Ordo, a fintech that protects consumers from invoice and payments fraud by allowing billers to send payment requests directly to it.
The U.K. has seen an epidemic in authorized push payment fraud (APP), in which customers are scammed into sending funds to accounts controlled by scammers. Last year, members of banking and finance association UK Finance reported 84,624 incidents of APP scams with gross losses of £354.3 million.
Nationwide’s investment in Ordo is part of its £50 million Venturing Fund, which is meant to create partnerships in which Nationwide and startups share expertise to develop useful services for its 15 million members.
“The Fund focuses on creating partnerships rather than just providing money to startups," said John Hutton, Nationwide’s director of payments. "As part of the investments, senior Nationwide members of staff with relevant experience become board observers to provide support and expertise to the businesses.”
London-based Ordo’s founders were part of the leadership team at the U.K.’s Faster Payments real-time scheme, which is operated by retail payments authority Pay.UK.
Due to launch this year, Ordo will use open banking APIs and Faster Payments to send funds. Under the U.K.’s open banking regulations, authorized non-bank Payments Institutions and Electronic Money Institutions can initiate payments from consumers’ accounts with their consent, irrespective of whom they bank with.
Ordo generates ‘smart requests’ on behalf of registered billers. These enable recipients to make real-time account-to-account bill payments using its app.
Ordo’s design uses email addresses and phone numbers to identify users, meaning that no banking details are shared between billers and customers, and the biller always receives payments containing the reference they originally provided. Ordo also allows businesses to include an invoice attachment within their end-to-end encrypted messages.
Although payment of regular bills via direct debit is common in the U.K., not everyone pays their bills that way. Ordo caters to people who want more control over when and how they pay regular bills, particularly those on low or irregular incomes, and for one-off payments such as paying a builder.
“Nationwide has many customers who would benefit from a request-to-pay service,” Hutton said. “For example, our collections and recoveries team support members who may need repayment plans to help them repay debt. Services like Ordo would allow members more control over how they pay their debt. Equally, those on irregular incomes could struggle with a Direct Debit for a mortgage, so being able to make repayments when they receive their salary could be of benefit.”
Craig Tillotson, Ordo's CEO, said the vendor's technology presents payors with a full list of all the smart requests that are due, as well as updated account balances to allow them to plan which bills to pay, and when.
“With the biller’s approval, they can also make multiple part payments to help with their budgeting needs,” said Tillotson.
Nationwide plans to launch SME banking services this year. Currently, it is the only major U.K. financial institution to not provide business banking accounts.
“We’re working through the details for our new business bank account,” said Hutton. “We’re looking to offer a range of services for business customers, which, in time, may include request-to-pay services like Ordo.”
Payments industry expert Francesco Burelli said offering Ordo will provide Nationwide with a way into the SME banking market.
“Ordo will reduce the cost of bill collection and reconciliation for billers, and reduce fraud overall through secured connectivity between billers and consumers,” he said.
Pay.UK is working with the U.K. banking industry on specifications for two types of system to eliminate authorized push payments fraud. The Confirmation of Payee system will warn payors if payee names and account numbers don’t match, while Request to Pay secure messaging services based on common standards will enable businesses to request payment for bills, rather than sending invoices.
A pilot of Request to Pay will launch in July 2019 prior to rollout of the system in the third quarter of 2019, according to a statement from Pay.UK.
Ordo is the first out of the gate, but a number of competing Request to Pay services are expected to be launched by payment service providers using the Faster Payments and Open Banking rails.
“Ordo … prevents fraudsters impersonating billers, and prevents billers’ account details being intercepted and changed to route payments from legitimate billers to fraudsters," Tillotson said.
To enable payee confirmation, “Ordo will work with any bank- or payments institution-operated Confirmation of Payment systems that are implemented over the next year or so," he said.