The US Department of the Treasury has handed a contract to JP Morgan to provide account validation services for federal government agencies.
The New York City-headquartered bank announced this week that it had been ‘designated under a financial agency agreement’ to handle the work after a competitive selection process.
JP Morgan described its appointment, which it said would run for at least five years, as ‘reflecting the important role that account validation plays in Treasury’s commitment to payment integrity and the reduction of improper payments.’
Federal Disbursement Services, which is part of the Treasury, issued nearly 1.4 billion payments totalling $5.27 trillion (about £4.3 trillion) in the fiscal year 2022. Ninety-six per cent of those payments, which include social security and Medicare (federal health insurance) payments, as well as unemployment insurance and tax refunds, were by electronic funds transfer. The rest were by traditional cheque.
But in the same fiscal year federal agencies made an estimated $247 billion (about £202 billion) ‘overpayment errors’ – payments that either should not have been made or were made in the incorrect amount, according to the US Government Accountability Office. Its website notes that ‘improper payments continue to be a significant problem in the federal government’.
Capitalising on technology and data
Improper payments due to fraud or clerical errors ‘can delay the delivery of critical funds to rightful recipients, lead to financial losses and erode public trust in government services’, JP Morgan notes in its announcement.
“This is a significant testament to our capabilities and it is particularly gratifying that this work will help to provide money to Americans faster, safer and more accurately while also saving taxpayer dollars,” said JP Morgan’s long-serving New York City-based global head of payments, Takis Georgakopoulos, in the bank’s announcement of its contract award.
The bank’s role will be to use technology to verify payment details before federal government payments are issued. It said it will do this using its ‘extensive network of secure customer information as well as industry data that the bank regularly accesses for payment processing’.
The bank described account validation as its latest assignment for the Treasury Department. In recent years it has also advised the Treasury as it digitises its payment systems and seeks to modernise the way that it pays and receives money from citizens and businesses.
FDS is located in Kansas City, Missouri, and was formerly the National Payment Center of Excellence (NPCE). It provides payment services for more than 300 federal agencies in total.